European stocks lost momentum on Friday as a brief rebound in AI-related shares failed to offset renewed concerns about the conflict between the United States and Iran.

The pan-European STOXX 600 closed flat, leaving the index on course for a weekly decline of nearly 2%, its steepest loss since mid-April. Germany’s DAX slipped 0.1%, while France’s CAC 40 and the UK’s FTSE 100 gained around 0.2%. Italy’s FTSE MIB rose 0.4%.

The market’s main concern is shifting back to inflation.

Reports that the US struck 90 Iranian targets, followed by Iranian attacks on American assets in Kuwait, Bahrain, and Qatar, raised fears of a wider conflict. Maritime traffic through the Strait of Hormuz has slowed sharply, threatening one of the world’s most important energy supply routes.

The breakdown of the fragile June truce pushed Brent crude back toward $77 per barrel. That move interrupted the recent decline in fuel prices and revived concerns that rising energy costs could keep inflation elevated.

For investors, the risk is clear:

  • Higher oil prices could pressure consumers and company margins
  • Inflation could remain stronger for longer
  • Central banks may have less room to lower interest rates

Those concerns overshadowed what should have been a strong session for technology stocks.

South Korean chipmaker SK Hynix attracted major investor demand for its US listing, raising $26.5 billion in one of the largest share sales on record. The deal briefly lifted semiconductor and AI infrastructure stocks, but the broader rally quickly faded as investors returned their attention to oil prices, inflation, and geopolitical risk.

The mixed reaction suggests that AI excitement alone may no longer be enough to carry the wider market when macroeconomic pressure is building.

Among individual stocks, EasyJet jumped around 15% after accepting a takeover approach from Apollo, while Vodafone gained more than 13% following a major stake purchase. St. James’s Place fell after one of its financial advice firms announced plans to exit.

The bigger picture is becoming more complicated.

AI demand remains strong, but markets are once again being forced to balance that growth story against higher energy prices, inflation risk, and renewed geopolitical uncertainty.

For now, European stocks are not collapsing.

But the rally is losing momentum, and investors may need more than another AI headline to push markets meaningfully higher.

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