The Spanish benchmark has posted declines in the three previous sessions, pressured by rising energy costs and the prospect of higher interest rates as a result of the war.
Geopolitical pressure continued to weigh on investor sentiment after the US military announced a new round of strikes against multiple targets in Iran on Wednesday, just hours after President Donald Trump vowed further bombings if a peace deal is not reached.
In response, Iran announced the closure of the Strait of Hormuz.
Against this backdrop, Brent crude rose 1.6% in the Asian session to 94.55 dollars, while Eurozone government bond yields approached recent highs.
Financial analysts believe that Asian markets, which had seen the strongest gains over the last two months, could extend their recent losses as the market questions whether the high earnings growth expectations that drove those rallies—partly in the tech sector due to the AI boom—can be sustained.
Some AI-related stocks showed some stability as Asian markets sought a floor after five declines in the last six sessions.
On the corporate front, Oracle shares plummeted 8.9% in extended trading after forecasting a capital expenditure plan for its 2027 fiscal year that exceeded Wall Street estimates.
In Europe, attention was also focused on the European Central Bank's monetary policy meeting, where an interest rate hike is taken for granted given the deteriorating inflation outlook caused by the conflict in the Middle East.
Investors will closely monitor any signals regarding the future path of monetary policy.
'We expect it to reiterate its data-dependent stance and meeting-by-meeting decision-making,' Renta 4 said in its morning report.
'Although the market is pricing in a second hike in Sept-2026 and a third in Q1 27, we believe the ECB should be cautious, with a somewhat hawkish tone to avoid the unanchoring of inflation expectations, but bearing in mind that we are not in the 2022 situation (...), and we must avoid replicating past mistakes that led to stagflation,' the brokerage added.
Traders also remained attentive to the financing cost outlook in the United States.
Before the war initiated three months ago by the United States and Israel against Iran, up to two rate cuts were expected this year. Now, markets are pricing in a hike of approximately 25 basis points by the end of 2026, according to LSEG's IRPR tool, and consider it more likely that the first upward move will occur in the final quarter.
In this context, at 0702 GMT on Thursday, the Spanish IBEX 35 index rose 10.70 points, or 0.06%, to 18,153.40 points, while the FTSE Eurofirst 300 index of leading European shares advanced 0.03%.
In the banking sector, Santander rose 0.29%, BBVA fell 0.10%, Caixabank advanced 0.71%, Sabadell gained 0.14%, Bankinter appreciated 0.58%, and Unicaja Banco rose 0.57%.
Among large-cap non-financial stocks, Telefonica fell 0.13%, Inditex shed 0.55%, Iberdrola dropped 0.37%, Cellnex gained 0.35%, and the oil company Repsol rose 1.73%.
(Reporting by Tomas Cobos; editing by Benjamin Mejias Valencia)
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