The IBEX 35 opened slightly higher on Friday, as investors await US employment data against a backdrop of ongoing concern over the conflict in the Middle East.

Based on opening levels, the Spanish benchmark is heading for a modest weekly decline following a volatile week for expectations regarding the Persian Gulf conflict and the valuation outlook for AI-linked stocks.

Investor focus is centered on the US non-farm payrolls report due early this afternoon (1230 GMT), with forecasts pointing to 85,000 net job additions and the unemployment rate holding steady at 4.3%. Any reading above expectations would bolster bets on a rate hike by the Federal Reserve (Fed).

Analysts at Renta 4 anticipate 'a resilient labor market already signaled by JOLTS job openings and the ADP private payrolls survey'.

'The data will be relevant for the Fed, with the market currently discounting a +25 bps hike between late 2026 and early 2027. Should a resilient labor market be confirmed, the focus could shift further toward the price stability mandate (2%, with May CPI due next week potentially rebounding to 4.2%e)', they added.

According to LSEG's IRPR tool, the probability of Fed interest rates being higher than current levels rises to 66.3% for March 2027.

In parallel, traders are seeking more clarity on negotiations between the United States and Iran, in a week that is on track to close with gains in crude oil after recent hostilities reignited fears of a prolonged energy shortage.

The Iran-aligned Hezbollah militia rejected a new ceasefire in Lebanon on Thursday, while Israel warned it would not withdraw its troops from the country, undermining efforts by US President Donald Trump to halt the fighting and reach a peace deal with Tehran.

Iran has conditioned any peace agreement with Washington on a ceasefire in Lebanon and has suggested in recent days that it could intervene directly if Israel continues its strikes.

Adding to the geopolitical jitters was a downward session in Asian markets, where investors took profits in tech stocks as the AI-related correction extended for a second day, triggered by disappointing results from chipmaker Broadcom on Wednesday.

Confidence was also shaken by tremors in the crypto-asset market, where declines continued. Bitcoin fell 1.4% on the day and is facing a weekly drop of 15%, its largest since the collapse of FTX in November 2022.

Against this backdrop, at 0701 GMT on Friday, the Spanish IBEX 35 index was up 58.50 points, or 0.32%, at 18,334.50 points, while the pan-European FTSE Eurofirst 300 index slipped 0.03%.

For the week as a whole, the IBEX 35 shows a decline of 0.15%.

In the banking sector, Santander rose 0.06%, BBVA gained 0.10%, Caixabank advanced 0.30%, Sabadell climbed 0.25%, Bankinter appreciated 0.46%, and Unicaja Banco was up 0.28%.

Among large-cap non-financial stocks, Telefónica gained 0.13%, Inditex advanced 0.85%, Iberdrola rose 0.84%, Cellnex climbed 1.04%, and oil major Repsol shed 0.17%.

(Reporting by Tomás Cobos; editing by Benjamín Mejías Valencia)