Global Market: European shares little changed as bond yields rise and gulf tensions lift oil

European shares were little changed on Friday and remained on course for a second straight weekly decline as renewed pressure in global bond markets weighed on sentiment, while rising oil prices fueled inflation concerns, Reuters reported.

The pan-European STOXX 600 was up 0.06% at 650.79 points as of 0705 GMT. The index was still headed for a weekly loss as investors assessed higher borrowing costs and persistent geopolitical risks.

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Bond Market Pressure Weighs on Sentiment

U.S. Treasury yields resumed their climb after an intervention by the U.S. Treasury on Wednesday offered only temporary relief to a battered bond market. The renewed rise in yields added to pressure on equity markets by increasing borrowing costs and reducing the appeal of riskier assets.

U.S. Treasury Secretary Scott Bessent indicated that the government could expand its Treasury buyback programme and also raised the prospect of fiscal consolidation. However, the measures failed to provide lasting support to the bond market.

Reuters reported that the renewed weakness in government bonds remained a key factor weighing on European equities as investors continued to monitor the outlook for interest rates and inflation.

Basic Resources Lead Sectoral Gains

Basic resources stocks were among the strongest performers in Europe, gaining 1.3%. The sector benefited from a softer U.S. dollar, which helped lift gold prices.

The move in commodities provided some support to mining and metals-related shares even as broader market sentiment remained cautious.

Gulf Tensions Push Oil Higher

Oil prices added to inflation concerns after a diplomatic deadlock in the Gulf reduced optimism over an agreement to fully reopen the Strait of Hormuz, a critical route for global energy shipments.

Brent crude climbed to a one-month high of $94.71 a barrel before giving up some gains as investors took profits.

Reuters reported that the latest rise in oil prices was also linked to escalating tensions between Washington and Tehran. Bessent said the United States would pursue tougher sanctions against Iran, reinforcing concerns that geopolitical tensions could persist and disrupt energy markets.

Higher crude prices have revived worries about inflation, potentially complicating the outlook for central banks that are seeking to balance economic growth with price stability.

Investors Remain Focused on Inflation and Rates

The combination of higher bond yields, elevated oil prices and geopolitical uncertainty has left European equities vulnerable as investors assess the outlook for monetary policy.

With the STOXX 600 heading for another weekly decline, markets are likely to remain sensitive to movements in government bond yields and energy prices, particularly if oil prices remain elevated for an extended period.

Reuters said the renewed pressure across bond and energy markets underscored the challenges facing investors as they navigate inflation risks alongside geopolitical uncertainty.

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