Europe close: Stocks slip as oil tops $100 again

(Sharecast News) - European stocks were back below the waterline by the close on Friday as oil prices rose back above the $100 mark, even after the United States paused sanctions on Russian oil exports and announced a fresh release from its strategic reserves in an effort to ease the supply shock caused by the war involving Iran.

The pan-European Stoxx 600 slipped 0.5% to 595.85.

Germany's DAX lost 0.6% to 23,447.29, while France's CAC 40 was off 0.91% to 7,911.53.

London's FTSE 100 was 0.43% weaker at 10,261.15.

Patrick Munnelly, market strategy partner at TickMill, said "London's leading stock indexes extended their decline on Friday, with escalating tensions in the Middle East stoking fears of rising inflation and adding uncertainty to the Bank of England's monetary policy outlook," adding that "the ongoing US-Israel conflict, with Iran as a central player, has now entered its second week with no resolution in sight, leaving investors increasingly anxious about a prolonged crisis."

Oil markets remained central to the outlook.

Brent crude was last up 0.55% to $101.01 a barrel on ICE, while West Texas Intermediate added 0.88% to $96.57 on NYMEX, having fallen earlier after the US Energy Department confirmed it would release 172 million barrels from the Strategic Petroleum Reserve.

In addition, the Trump administration issued a 30-day waiver allowing countries to purchase sanctioned Russian oil and petroleum products currently stranded at sea, a move aimed at easing fuel shortages and curbing rising petrol prices during an election year.

Axel Rudolph, chief technical analyst at IG, said: "Most commodity prices were little changed on the day with Brent crude remaining above the $100 mark amid no signs of de-escalation in the Iran conflict."

Money markets were now fully pricing in a European Central Bank rate hike by July and assigned a 70% probability of a second increase by December, compared with only a 40% chance that policymakers cut rates again before year-end.

Rudolph noted that "US consumer sentiment, GDP growth and eurozone industrial production slumped amid Iran war concerns while US core prices rose as expected," adding that geopolitical developments were also weighing on sentiment after "news that the Pentagon is sending a 2,500 Marines expeditionary unit to the Middle East weighed on stocks later in the day."

UK economy stalls in January, US GDP growth revised sharply lower

Economic data painted a mixed picture.

In the UK, official figures showed the economy stalled in January, with GDP flat on the month following a 0.1% rise in December and below expectations for a 0.2% increase.

Construction output rose 0.2%, but services - the dominant sector - showed no growth and production declined 0.1%.

Over the three months to January, GDP rose 0.2%, missing forecasts for a 0.3% increase.

Services expanded 0.2% while production output climbed 1.3%, though construction output fell 2.0% after a 2.1% drop in the previous quarter.

Year on year, the economy grew 0.8%.

Liz McKeown, director of economic statistics at the Office for National Statistics, said: "Growth ticked up slightly in the latest three months, partly reflecting the recovery of car manufacturing following the cyber incident in the autumn.

"Within services, which also increased, wholesale continued to rebound from a weak summer.

"However, the overall picture remains subdued, with no growth in the latest month."

Analysts warned the economic outlook could deteriorate further as energy prices remain volatile.

Oxford Economics said that even before the conflict began the UK economy was struggling to gain momentum, while Danni Hewson, head of financial analysis at AJ Bell, said: "While the figures continue to shed light on the weakness of the country's economy, with construction particularly impacted despite the government's big push to get Britain building, it can't provide much clarity on what's next.

"The war in Iran has completely changed the playing field, and the playbook Rachel Reeves has been working from might need ripping up."

Munnelly added that "analysts caution that while reopening the Strait of Hormuz by the end of March could mitigate economic fallout, an extended closure coupled with sustained high energy prices could severely impact global markets."

Across the Atlantic, US economic growth for the fourth quarter of 2025 was revised sharply lower.

The second estimate of real GDP showed annualised growth of just 0.7%, down from the 1.4% flash estimate and well below the 4.4% expansion recorded in the third quarter.

The US Bureau of Economic Analysis said the revision reflected downward adjustments to exports, consumer spending, government spending and investment.

Real final sales to private domestic purchasers rose 1.9% in the quarter, down 0.5 percentage points from the initial estimate, while exports were revised to show a 3.3% annualised decline - the steepest drop since the second quarter of 2023.

Government spending and investment fell 5.8%, reflecting the impact of the largest US government shutdown in history between October and November.

For 2025 as a whole, US GDP rose 2.1%, slowing from 2.8% in 2024 and coming in below the 2.2% consensus forecast.

Inflation data showed only limited progress in easing price pressures.

Headline personal consumption expenditures inflation slowed slightly to 2.8% year on year in January from 2.9% in December, while the monthly increase of 0.3% matched expectations.

Core PCE, the Federal Reserve's preferred inflation measure, rose 0.4% on the month, leaving the annual rate at 3.1%, up from 3.0% previously and still well above the central bank's 2% target.

The report also showed personal income and spending both increased by 0.4% in January, suggesting consumer demand remains resilient.

BESI rises, Deutsche Bank falls back

In equities, BE Semiconductor Industries jumped 5.62% after reports that the Dutch chip-packaging specialist had received takeover interest from Lam Research and Applied Materials.

On the downside, Deutsche Bank lost 0.84% after paring earlier losses, a day after revealing a $30bn exposure to the private credit market, with the lender's shares broadly tracking moves in the European banking sector as investors assessed risks stemming from the Middle East conflict.

Reporting by Josh White for Sharecast.com.