The Spanish IBEX 35 index deepened its recent correction on Friday, slipping below the psychological threshold of 14,000 points after an Israeli offensive against Iran reignited fears of instability in the Middle East.
Tehran vowed revenge on Friday after Israel launched large-scale attacks on nuclear facilities, ballistic missile factories, and military command centers.
The reaction in financial markets--already jittery due to the US-initiated trade war--was swift. Oil prices surged sharply as investors flocked to safe-haven assets, while equities took a hit across the board.
Market observers had already noted in recent weeks the possibility of profit-taking after a strong upward trend in the first half of the year. As of Thursday's close, the IBEX 35 had gained 21.5% year-to-date, while the pan-European EuroStoxx 600 was up 8.3%.
"(...) It is impossible to know whether [the market situation] will worsen, because intensified Israeli attacks and very likely Iranian counterattacks could occur at any moment. Alternatively, we could see a brief calm followed by renewed attacks after a few days. There's no way to tell. The worst-case scenario would be Iran attacking US bases in oil-rich Gulf states, in addition to retaliating against Israel," analysts at Bankinter said.
"This could present an opportunity for markets to adjust downward, and once the geopolitical situation stabilizes, we might consider buying at reasonable prices. But that's looking too far ahead. We need to watch how events unfold over the weekend," they added, commenting on their Telegram channel.
Against this backdrop, at 0702 GMT on Friday, the IBEX 35 was down 191.40 points, or 1.36%, at 13,897.50, while the FTSE Eurofirst 300 index of leading European shares dropped 0.85%.
This marks the largest daily drop for the Spanish blue-chip index since April 9. For the week, the IBEX 35 is down 2.46%, its steepest weekly decline since early April.
In the banking sector, Santander lost 2.17%, BBVA fell 1.89%, Caixabank dropped 1.81%, Sabadell slipped 1.41%, Bankinter was down 1.44%, and Unicaja Banco declined 1.81%.
Among major non-financial stocks, Telefónica edged down 0.28%, Inditex fell 1.49%, Iberdrola rose 0.15%, and Cellnex dropped 0.67%.
Oil company Repsol bucked the downward trend, climbing 3.37% on the back of a more than 5% surge in oil prices.
(Reporting by Tomás Cobos; editing by Benjamín Mejías Valencia)
