Europe Markets Weekly — 2026-05-12

Market Snapshot

• STOXX 600: Slipped into negative territory Tuesday as U.S.-Iran peace prospects dimmed
• DAX: 24,332.44, down 0.03% in recent session
• FTSE 100: 10,257.43, up 0.24% in recent session
• CAC 40: 8,045.33, down 0.83% in recent session

Key Drivers

• Iran war pessimism weighs on equities: European markets began Tuesday's session in the red as prospects for a speedy resolution to the U.S.-Iran conflict appeared increasingly remote, reversing the optimism seen earlier in the week. Sentiment deteriorated across major bourses.

• BNP Paribas upgrades inflation and rate forecasts: BNP Paribas economists now project eurozone GDP growth slowing to 1.0% in 2026 (down from 1.5% in 2025), with inflation rebounding to 3.0% this year and 3.3% in 2027. The bank projects ECB rate hikes ahead, though activity is expected to be supported by investment in defence, AI, and electrification.

• STOXX Europe 600 ecosystem grows despite turbulence: On Europe Day (May 9), STOXX highlighted that its flagship 600-component index is attracting strong inflows into linked investment products, with new ETFs being launched that broaden trading and strategy options around European equities across 17 countries and 11 industries.

Earnings & Corporate

• Europe's best performers of 2026 revealed: A Euronews report published Tuesday identified the top-performing European equities of 2026, including one Swedish photonics stock up by an extraordinary 947% year-to-date, alongside strong gains in French satellite companies and British fuel cell producers — illustrating sharp sector divergence amid the broader geopolitical and energy shock.

• STOXX 600 earnings season context: With Q1 reporting season largely complete, STOXX 600 companies are forecast to report a meagre 0.2% revenue growth for the period, according to Reuters — though earnings growth is on track for its best year in three years, largely driven by the energy sector which is forecast to deliver outsized gains.

1 sources

euronews.com

euronews.com

Geopolitics & Energy

• Oil prices rise as Iran deal hopes fade: Crude oil prices climbed on Tuesday as fading U.S.-Iran peace prospects, tighter OPEC supply, and rising fuel costs deepened market anxiety. The reversal follows a brief period of optimism last week when Iran's Revolutionary Guard indicated the Strait of Hormuz could reopen. The renewed geopolitical premium in oil prices is feeding directly into European energy costs and dampening business confidence.

• ECB flags "new energy shock" risks: In a speech from May 6, an ECB official outlined economic scenarios and policy implications stemming from what the central bank described as "the new energy shock," underscoring how elevated and volatile energy prices are reshaping the ECB's policy calculus and complicating its efforts to balance inflation control against the risk of stalling growth.

What to Watch Next Week

• ECB communications: Watch for any speeches or minutes that could signal a shift in the rate-hold stance, particularly in light of BNP Paribas's call for ECB hikes amid rising inflation projections
• U.S.-Iran diplomatic developments: Any further deterioration or breakthrough in peace talks will likely drive sharp moves in both oil prices and European equities, particularly energy, travel, and industrials sectors
• Eurozone inflation and growth data: With Q1 GDP coming in at just 0.1% and April inflation jumping to 3%, upcoming flash estimates and PMI readings will be closely scrutinised for signs of stagflation deepening across the bloc