Europe Markets Weekly — 2026-05-11
European equity markets ended a volatile week in mixed territory, with early gains driven by Middle East peace optimism quickly offset by renewed U.S. tariff threats from President Trump targeting the EU. Energy stocks continued to outperform as the Strait of Hormuz situation remained in flux, while Trump's rejection of Iran's latest peace offer late in the week renewed geopolitical uncertainty heading into Monday. Investors are bracing for another choppy week as U.S.-Iran negotiations remain at an impasse and EU-U.S. trade tensions escalate.
Europe Markets Weekly — 2026-05-11
Market Snapshot
- STOXX 600: Mixed for the week; cautious optimism on earnings backdrop noted amid geopolitical volatility
- DAX: +0.19% for the week, Germany's index eked out a small gain despite EU tariff fears
- FTSE 100: Under pressure; UK markets weighed by Trump's renewed tariff threats against the EU
- CAC 40: Little changed for the week, as France's index oscillated between peace deal optimism and tariff-related selling
Key Drivers
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Trump's EU tariff threat soured sentiment late in the week. European equity markets closed lower on Friday after President Trump threatened to impose significantly higher tariffs on the EU unless the bloc eliminated its tariffs on U.S. goods, reversing earlier weekly gains. The FTSE 100 and broader European indices fell on the news.
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Middle East peace optimism had briefly lifted markets mid-week. European shares advanced to a two-week high on Wednesday after President Trump cited "great progress" toward a comprehensive peace agreement with Iran, pushing oil prices lower and boosting risk appetite. However, that optimism evaporated as Trump and Iran subsequently rejected each other's latest proposals, with EUR/USD falling to near 1.1750 on Monday morning.
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European corporate earnings heading for best growth in three years. LSEG I/B/E/S data showed that STOXX 600 companies are on track for their strongest earnings growth since Q1 2023, propelled largely by soaring profits among energy majors. However, revenue growth for the broader index is forecast at a meagre 0.2%, highlighting how narrow the outperformance remains.
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UK labour market concerns weighed on FTSE sentiment. Investment Week's Market Movers blog flagged forecasts that the UK stands to lose approximately 163,000 jobs in 2026 due to the economic impact of the ongoing Middle East conflict, adding a domestic headwind to already fragile investor confidence.
Earnings & Corporate
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European energy majors driving outsized earnings beats. According to Reuters, energy sector companies within the STOXX 600 are forecast to deliver approximately 27% earnings growth for Q1 2026, far outpacing the broader index average. This sector-concentrated outperformance is skewing the overall STOXX 600 earnings growth figure upward, masking weaker results elsewhere. Shares in energy companies remained broadly supported through the week.
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Italy's FTSE MIB outperformed its European peers with a 2.16% weekly gain, according to T. Rowe Price's global markets weekly update, as Italian equities benefited from a combination of positive earnings momentum and relative insulation from the UK-specific political risks surrounding the British election. The broader Italian market's move stood in contrast to the flat-to-negative performance of peers in France and Germany.
Geopolitics & Energy
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Iran-U.S. peace talks collapse again, driving fresh energy market volatility. Oil and gas prices had fallen sharply earlier in the week on reports that Iran's Islamic Revolutionary Guard Corps announced the Strait of Hormuz could reopen following the de-escalation of threats. However, Trump's outright rejection of Iran's latest peace proposal over the weekend sent fresh uncertainty into energy markets, with EUR/USD slipping to around 1.1750 in early Asian trade on Monday.
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Europe's renewable energy push accelerates as a security response to fossil fuel shocks. A new analysis published May 9 by NordiskPost highlighted that European renewable energy investment is increasingly being framed as a strategic security imperative, rather than merely a climate goal, as the continent seeks to insulate itself from price volatility stemming from the Iran conflict and continued disruptions to global fossil fuel supply chains. The ECB also published a speech on May 6 outlining economic scenarios for the "new energy shock," stressing policy implications for the eurozone.
What to Watch Next Week
- U.S.-Iran peace negotiations: Any renewed diplomatic breakthrough — or further breakdown — will likely be the single biggest driver of European energy prices and risk sentiment. Markets will closely track statements from Washington and Tehran following Trump's weekend rejection of Iran's latest proposal.
- EU-U.S. trade talks: Following Trump's threat of substantially higher tariffs on EU goods, investors will monitor whether Brussels responds formally or whether any emergency trade negotiation is convened. A further escalation could pressure export-heavy DAX and CAC 40 constituents.
- European corporate earnings continuation: With STOXX 600 Q1 earnings season still in progress and energy sector results skewing the aggregate higher, investors will watch for results outside the energy sector to gauge the breadth of the recovery — particularly in consumer discretionary and industrials.
- UK political developments: The UK election result and its implications for Starmer's Labour government and Reform UK's performance will continue to weigh on FTSE 100 sentiment and sterling positioning.
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