European stocks closed sharply lower on Friday as the ongoing conflict in the Middle East fueled fresh surges in energy prices and darkened the region’s economic outlook. The Eurozone’s STOXX 50 fell 1.3% to 5,707, bringing its weekly loss to 7.2%, while the pan-European STOXX 600 declined 1.2% to 598, down 5.7% for the week.
European bond yields moved higher as the rally in natural gas and crude oil prices reinforced expectations that the ECB may be forced to raise interest rates. The prospect of tighter policy weighed on banks, with higher funding and credit costs clouding their lending outlook. Deutsche Bank dropped 3.5% and Intesa Sanpaolo slid 2.5%.
Rate-sensitive technology names in the AI sector also came under pressure, with ASML losing 3.3% and Infineon plunging 7%. At the same time, rising metals costs and shipping bottlenecks hit major German automakers, where Volkswagen and BMW each fell by more than 3%.
