(Sharecast News) - European shares closed higher on Thursday after the European Central Bank raised interest rates as expected, even as the US and Iran again exchanged missile strikes.
The pan-European Stoxx 600 rose 0.54% to 621.53.
Germany's DAX edged up 0.06% to 24,209.71, France's CAC 40 gained 0.48% to 8,200.80, and London's FTSE 100 advanced 0.48% to 10,303.88.
In commodities, Brent crude futures were last up 0.71% on ICE at $93.76 per barrel, while the NYMEX quote for West Texas Intermediate gained 1.39% to $91.28.
Chris Beauchamp, chief market analyst at IG, said stock markets and oil traders were continuing to bet on a US-Iran deal despite "the ramping up of aggressive rhetoric in Washington".
Danni Hewson, head of financial analysis at AJ Bell, said: "Despite threats from the White House that Iran will be hit 'very hard' tonight, markets have remained buoyant with US chip stocks rallying after a bruising session yesterday."
Kuwait temporarily closed its airspace after air defences were deployed to respond to incoming attacks from Iran, while Tehran also targeted Bahrain and Jordan, both of which host US military bases.
US Central Command said it had completed a second round of airstrikes on Iran, targeting "military surveillance capabilities, communication systems and air defence sites".
"Trump appears to be running through the Iran war hits of three months ago, only much faster," Beauchamp said.
"Yesterday he threatened to restart the war, and now a seizure of Kharg is back on the agenda.
"But oil remains quiet, as traders take the view that his clear preference for a deal points towards an attempt to pile on the pressure on Iran to get an agreement across the line."
ECB raises rates by 25 basis points, as expected
On the economic front, the ECB lifted interest rates by 25 basis points, marking its first increase since September 2023.
The deposit rate was raised to 2.25%, while the main refinancing rate and marginal lending facility were increased to 2.40% and 2.65%, respectively, with effect from 17 June.
"The Governing Council is committed to setting monetary policy to ensure that inflation stabilises at its 2% target in the medium term," the ECB said.
It added that the Middle East war was generating inflation pressures and that the decision to raise rates was "robust across a range of scenarios" for how the shock could affect the eurozone outlook.
"The decision by the European Central Bank to raise interest rates was widely expected, but is unlikely to be swiftly followed in either the UK or the US despite a jump in producer prices on the other side of the Atlantic," Hewson said.
"There is concern about rising prices but there are also nerves about the weakness permeating the global economy, something highlighted by the World Bank in its forecast suggesting growth could slow to levels last seen at the start of the pandemic," she added.
The central bank now expects headline inflation to average 3.0% in 2026, 2.3% in 2027 and 2.0% in 2028, compared with previous forecasts of 2.6%, 2.0% and 2.1%, respectively.
It said the upward revisions for 2026 and 2027 reflected a higher path for energy prices, which was expected to feed into food, goods and services inflation.
The ECB also downgraded its growth forecasts, now expecting eurozone GDP to expand by 0.8% in 2026, 1.2% in 2027 and 1.5% in 2028.
It said the revisions for 2026 and 2027 reflected a more pronounced impact from the war on commodity markets, real incomes and confidence.
In the US, initial jobless claims rose more than expected in the week ended 6 June.
The Department of Labor said claims increased by 4,000 to 229,000, the highest level since February and above expectations for a fall to 219,000.
Continuing claims slipped by 24,000 to 1.79m, while the insured unemployment rate was unchanged at 1.2%.
Hugo Boss rises on takeover bid, Halma in the red
In equity markets, Hugo Boss surged 9.05% after its largest shareholder, Frasers Group, launched a 2bn bid for the German fashion company.
Frasers itself rose 1.04%.
On the downside, Halma fell 15.38% despite the safety equipment specialist posting a rise in full-year earnings.
Reporting by Josh White for Sharecast.com.
49.07 (0.48%)
0.00