European shares moved slightly lower on Friday and were on course to end a four-week winning streak as rising oil prices and renewed geopolitical tensions weighed on investor sentiment.
The STOXX 600 slipped 0.04% to 658.99 by 09:10 GMT. The index remained close to record highs, although it was down around 0.2% for the week after gaining 3.3% over the previous four weeks.
Strong Earnings Continue to Support Markets
European equities have remained supported by improving corporate earnings expectations.
Second-quarter profit forecasts for major European companies have now increased for eight consecutive weeks. Aggregate earnings for STOXX 600 companies are expected to rise around 23.4%, driven largely by strong results in the energy and materials sectors.
However, higher oil prices and geopolitical risks have limited investor appetite for riskier assets.
Oil Prices Rise on U.S.-Iran Tensions
Oil futures climbed around 1% to $87.92 a barrel after the United States threatened to maintain an indefinite naval blockade of Iran.
Negotiations between Washington and Tehran remained stalled, while rhetoric from both sides became increasingly aggressive.
Investors are also closely monitoring shipping conditions through the Strait of Hormuz, a critical route for global energy supplies.
Without a clear agreement that allows shipping traffic to return to normal, analysts expect oil prices to remain volatile and potentially range-bound.
Energy Stocks Rise While Miners Decline
European energy shares gained around 0.3%, supported by higher crude prices.
Mining stocks, however, were among the weakest sectors, falling approximately 1.1% as gold prices declined.
Gold had reached a more than two-month high on Thursday, prompting some investors to lock in profits after the recent rally.
Softer U.S. Inflation Supports Rate Outlook
European markets also received some support from softer U.S. inflation data.
Both consumer and producer price reports released this week reinforced expectations that the Federal Reserve may avoid further monetary tightening in the near term.
Lower expectations for additional U.S. interest rate hikes have helped support global risk sentiment, although geopolitical uncertainty continues to limit gains.
European Technology Stocks Rally
Technology shares advanced around 1.1% after Reuters reported that private equity firm Silver Lake was in discussions to acquire Workday.
The report renewed investor interest in traditional software companies, many of which had previously come under pressure because of concerns that artificial intelligence could disrupt their business models.
European software companies including SAP, Nemetschek, Temenos and Sage gained between roughly 3% and 8.5%.
Defence stocks were also among the strongest performers, with the sector gaining around 1.2%.
Eurozone Economy Expands 0.4%
Investors also assessed fresh economic data from the eurozone.
The regional economy grew 0.4% in the second quarter compared with the previous three months, matching market expectations.
Employment increased by 0.1%, also in line with forecasts.
The data suggested that the eurozone economy continued to expand at a modest pace despite ongoing geopolitical and energy-related uncertainty.
GB Group Shares Plunge After Forecast Cut
Corporate news was relatively limited as the European earnings season approached its end.
One notable mover was GB Group, whose shares fell around 27% to their lowest level since 2015 after the company lowered its 2027 revenue growth forecast.
For now, European markets remain caught between strong earnings growth and rising geopolitical risks, with oil prices and developments involving Iran likely to remain key drivers of sentiment.
