European Midday Briefing: Stocks Fall as Risk of Iran War Escalation Lifts Energy Prices

MARKET WRAPS

European equities were down, losing further ground from Thursday's prior session, as investors weighed the prospect of renewed military strikes by the U.S. and Israel on Iran.

With diplomacy stalled and the U.S. moving more military assets into the region, Iran warned that if it and Israel resume bombing, Tehran would respond by targeting American bases and warships, as well as airports, pipelines and other civilian targets in the Persian Gulf.

The threat of military strikes in that region spurred oil prices higher, adding to concerns regarding France's fiscal situation and prompting investors to search for safe haven investments.

The market has real concerns, according to Domini Impact Investments, as French debt was trading at yields above those of Italy and Greece.

Societe Generale, meanwhile, warned of fresh volatility ahead in the eurozone's second-largest economy "given uncertainties about next social protests, the budget adoption and investors not yet keen to add a lot of risk."

Approaching midday, the FTSE 100, the CAC 40 and the DAX were down. The pan-European Stoxx 600 index was in negative territory.

After Thursday's tech selloff, European semiconductor companies were mixed Friday, with ASML and ASM International down in the Netherlands, Soitec gaining in France, and Infineon rising while STMicroelectronics fell in Germany.

Economic Insight

The European Central Bank would not hesitate to intervene if monetary policy transmission were impaired, but TwentyFour Asset Management doesn't see evidence of this happening yet.

"If there were disorderly reactions in Italian and other government bond markets, then the ECB's first steps would likely be an attempt to calm markets with verbal intervention, or a reduction or termination of its quantitative tightening (QT) program."

Nomura expects ECB President Christine Lagarde to refrain from commenting on France at her press conference next week and instead affirm that the ECB has the necessary tools to ward off unwarranted and disorderly market moves.

Elsewhere, inflation expectations among households in the eurozone crept higher in September as the war in the Middle East dragged on.

U.S. Markets:

U.S. futures pointed to a mostly lower open after tech stocks fell sharply Thursday. Sentiment in the prior session was weighed down by the vast amount of capital needed to fund AI and the Nasdaq logged its worst day since June.

Forex:

The dollar recovered after reaching a three-week low against a basket of currencies on Thursday. Higher oil prices support the dollar as the U.S. is a net oil exporter while the currency tends to act as a safe haven.

Sterling fell against the dollar but was little moved after worse-than-expected U.K. retail sales data.

The euro fell further against the dollar after the flash October eurozone purchasing managers' index survey fell short of estimates. Bonds:

The 10-year OAT yield trimmed falls after weaker-than-expected flash estimate purchasing managers data. The flash estimate came in at 48.4 in October, signaling a contraction in business activity. The 10-year OAT yield last traded at 5.070%, down 0.5 basis points on the day.

Treasuries were the beneficiaries of investors seeking to put distance between themselves and the turmoil in French government bonds. The 10-year Treasury yield rose but remained under 5%.

Eurozone government bond supply in 2027 was expected to reach a record high of 1.583 trillion euros, Commerzbank said. Germany looked set in 2027 to emerge as the largest eurozone government bond issuer for the first time, with an estimated gross bond supply of 400 billion euros, Commerzbank added.

"With the budget deficit and special funds for defense and infrastructure, net financing needs look set to rise to above 200 billion euros."

Energy:

Oil prices were on track for a weekly gain after climbing to a five-month high over fears that the U.S. could attack Iran after the midterm elections in early November.

Natural Gas

European natural-gas prices climbed to their highest since late 2022 as mounting U.S.-Iran war risks raised fears of winter LNG supply disruptions.

Metals:

Gold was headed for a weekly loss as elevated energy prices fueled concerns over inflation and interest-rate hikes.

"A rising inflation backdrop along with selling pressure to cover losses in equity or bond market positions is a negative combination for gold in the short-term even as the Fed is looking assured to keep rates unchanged at next week's FOMC meeting," MUFG said.

EMEA HEADLINES

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The system was working more normally Thursday, shortly after their conversation, U.S. and Ukrainian officials said. Some Ukrainian officials said the system wasn't restored to full functionality but was working at higher speeds than under the cap.

Eight Charts That Show the Depth of France's Financial Crunch

The worst unrest in years has swept France, as rioters have attacked government buildings and stores while hundreds of thousands protest rising living costs.

The problem for the government, as it seeks to address the demands of protesters, is that years of spending to protect consumers from price hikes have left the country's finances in a precarious state. One of the largest budget deficits in Europe and political gridlock have driven investors to sell French bonds, pushing the country's 10-year borrowing costs above 5%.

Safran Confirms Guidance as Revenue Jumps

Safran confirmed its full-year outlook after third-quarter revenue climbed on double-digit growth across its propulsion and equipment and defense units.

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U.K. Consumer Confidence Suffers Biggest Drop Since Pandemic

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GLOBAL NEWS

Meta's Hunt for AI Capital Strikes a Raw Nerve on Wall Street

The vast amount of capital needed to fund the artificial-intelligence build-out is forcing tech giants to hunt for ever-larger sums of cash-and Wall Street is raising a bright red flag.

Signals from Meta Platforms that it could soon go on a cash-raising spree helped trigger another massive rotation trade on Thursday, with investors dumping stocks connected to the AI boom and piling into almost everything else, from U.S. Treasurys to the beaten-down shares of home builders and software companies.

Oil prices approach Iran-war highs as soaring tanker rates trigger a second energy squeeze

Wall Street has grown more worried about the Middle East scenario everyone fears: a full-scale regional conflict that could further choke off global energy supplies.

The major concern is that an escalation of the Iran war - now almost eight months old - could unleash a fresh wave of turmoil across financial markets.

Investors Snap Up Treasuries During Tech Rout, Driving the Yield Below 5%

After weeks of dumping Treasuries, investors piled back into the safest asset amid a brutal selloff in tech stocks.

The yield on the benchmark 10-year Treasury dipped below the 5% level as it declined by 0.2 percentage points, its biggest one-day fall since March 2023. Bond yields drop when bond prices rise.

China's Most Controversial Region Has Become a Showcase for Its Commercial Ambitions

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El Salvador Sends Troops to Haiti to Rescue Military Personnel After Gang Ambush

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Kofi Asante wants to float a nuclear reactor on a barge off the Port of Long Beach-and government officials are actively trying to help make it happen.

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October 23, 2026 05:17 ET (09:17 GMT)