European shares continue to decline as inflation fears fuelled by the Mideast conflict cause a second consecutive week of losses.

The European?shares continued to decline on Friday, marking their second consecutive week of losses. This was due to the escalating conflict in the Middle East and inflation concerns.

The benchmark pan-European?STOXX?600 closed 0.5% down. All major regional exchanges posted marginal weekly losses.

The index was dragged down by industrial stocks, which fell 1.8%. Siemens Energy dropped 5.7%, and Rolls-Royce dropped 5.3%.

The biggest percentage drop was experienced by miners, who lost 3.3%. Silver prices fell more than 3% and copper prices dropped over 1%. Gold prices were also slightly lower.

As the U.S. and Israeli war against Iran neared the two-week mark, global markets continued to?decline. U.S. president Donald Trump announced that the U.S. would be hitting Iran "very heavily" over the next seven days, prompting the markets to prepare for a long-term conflict and to reassess their interest rate expectations.

Pascal Koeppel is the chief investment officer of Vontobel SFA Investment Management. He said that Iran and the U.S. both have an interest in ending the war. He said that Iran's main interest was to reopen the Strait of Hormuz. For the U.S., the priority is to rein in rising defence costs before the November midterm elections.

The impact on rates and inflation is less than the market fears. At the moment the fear is greater, so the European market corrections are taking place," he said.

According to LSEG data, the markets have already priced in a quarter-point increase by the European Central Bank at the end of this year. They also see a 75% chance that another move of the same magnitude will occur. The market had expected a rate reduction earlier in the year.

The price of oil was 1% higher Friday as it became apparent that the Strait of Hormuz remains closed.

This week, energy stocks outperformed other sectors with a gain of nearly 5%. The?banks that are most sensitive to the economy fell by 1.2%. Standard Chartered, HSBC and the other global banks that are most vulnerable to the Iran war, according to an analysis, have extended their monthly 'declines' to more than 15%. The data showed that harmonised French inflation rose by 1.1% on an annual basis in February, and the British economy expanded by 0.2% over the last three months of January. This was below expectations. BE Semiconductor Industries' shares rose 5.6% after the chip-equipment manufacturer fielded takeover interests, according to a report. Berkeley Group warned that the conflict in the Middle East weighed on risk sentiment while reaffirming their annual profit outlook. Shares of the homebuilder fell 1.5%.

Zalando's stock rose about 7% following Bernstein's upgrade of the online fashion retailer from "underperform" to "market perform." Reporting by Avinash P. and Purvi Agarwal, Bengaluru. Editing by Vijay Kishore & Ethan Smith.

(source: Reuters)