European stocks opened the trading day in negative territory as market participants tried to process rapidly shifting developments linked to the war in Iran and their implications for energy markets and monetary policy.
By 04:10 ET (08:10 GMT) major European indices were down: the pan-European Stoxx 600 had fallen 0.7%, Germany's Dax slid 0.9%, France's CAC 40 was off 0.5%, and the U.K.'s FTSE 100 dropped 0.6%.
Media reports indicated that Tehran is reviewing a 15-point peace proposal from the United States, though officials on both sides appear to be distant from an immediate agreement to end what has been described as an almost month-old conflict. U.S. President Donald Trump has told aides he wants a rapid resolution to the fighting, according to published accounts, a sign the White House may be seeking an exit from its joint operations with Israel.
At the same time, that portrayal of Iranian readiness to negotiate contrasts with remarks reportedly made by Iran's foreign minister, who has said Tehran has no intention of entering talks aimed at slowing the war. The two narratives have left markets parsing the likelihood and timing of any diplomatic de-escalation.
Energy markets remained a focal point for investors. Oil prices have stayed elevated amid ongoing concerns about a prolonged closure of the Strait of Hormuz, a strategic channel through which roughly a fifth of the world's oil and natural gas flows. The possibility of Iranian attacks has effectively shut the strait for weeks, sustaining upward pressure on crude and feeding renewed worries about a spike in inflation globally.
Those inflation concerns have had monetary policy implications. Some central bankers have begun to signal that higher interest rates might need to be reconsidered as an option. On Wednesday, European Central Bank President Christine Lagarde said that an uptick in borrowing costs could be appropriate even if inflation proves to be "not-too-persistent" and stems from an energy shock related to the Iran conflict.
In the oil patch, the futures contract for Brent crude due to expire in May was last reported up 2.8%, trading at $105.04 a barrel. Brent has eased from levels around $110 a barrel last week amid hopes that the war might soon end, but it remains substantially above the prices seen prior to the outbreak of the conflict in late February.
Market analysts have cautioned that even with a short-lived cessation of hostilities, a near-term risk premium on oil could persist, implying that crude may not quickly revert to pre-conflict price levels. That premium would continue to influence inflation readings and, by extension, the policy calculus for central banks.
With equities sensitive to both energy-price dynamics and the shifting prospects for central-bank action, investors remained cautious at the market open as they awaited clearer signals on diplomacy and the trajectory of oil prices.
Snapshot
European indices opened lower as reports of a U.S. 15-point peace proposal under review by Tehran competed with conflicting official statements, while elevated oil prices and central-bank comments on potential rate action added pressure to risk assets.