Geopolitical Tensions Spike as Iran Closes Strait of Hormuz, Pressuring European Equities

The CAC 40 declined 0.8% to 8,197.81 on Thursday, erasing gains from a previous rally as investors reacted to escalating tensions between Iran and the West. The market shift follows reports that Iran has closed the Strait of Hormuz, threatening the stability of a recently announced two-week ceasefire. The fragility of the truce is compounded by ongoing Israeli military operations in Lebanon. Iranian Foreign Minister Araghchi stated that the U.S. must choose between a ceasefire or continued war, while President Donald Trump maintained that U.S. military forces will remain deployed until Tehran adheres to a 'real agreement.' Energy markets reacted sharply to the supply risk, with Brent Crude futures surging to a peak of $98.53 per barrel before settling at $97.54, representing a nearly 3% increase from the previous close. This spike has reignited concerns regarding global inflation and input costs for manufacturers. The downturn hit luxury and industrial sectors hardest. LVMH shares dropped 3.7%, while Dassault Systemes, Kering, and Airbus saw declines between 2% and 2.6%. Conversely, energy-linked firms such as TotalEnergies and Engie posted moderate gains, reflecting the inverse relationship between oil price spikes and broader equity sentiment.