European stocks rebounded on Friday, March 20, 2026, following a turbulent week marked by concerns over the U.S.-Iran war and its potential impact on global energy prices and inflation. The Stoxx 600 index rose by 0.9% shortly after the opening bell, with Germany's DAX up 1.4%, France's CAC 40 up 0.9%, and the UK's FTSE 100 up 0.6% in early morning trade. All sectors except oil and gas saw gains, with banks and construction stocks leading the recovery [1].
The relief in markets came after regional stocks had closed sharply lower on Thursday, driven by fears that the escalation in the U.S.-Iran conflict could trigger an energy shock and increase inflationary pressures. Oil prices briefly reached $119 a barrel, prompting a risk-off sentiment and widespread sell-offs across asset classes. However, oil prices fell on Friday morning after U.S. Treasury Secretary Scott Bessent indicated that Washington may lift sanctions on Iranian crude stored aboard tankers to help cool energy costs [1].
Central banks across Europe, including the European Central Bank (ECB), Bank of England, Swiss National Bank, and Sweden's Riksbank, held interest rates steady this week, citing the Iran war as a new source of uncertainty for inflation. The ECB highlighted "upside risks for inflation and downside risks for economic growth," leading traders to increase bets on potential ECB rate hikes later in the year. Investors are currently pricing in more than a 50% chance of a rate hike at the ECB's next meeting in April. The Bank of England's Monetary Policy Committee voted unanimously to keep rates on hold but signaled readiness to act if necessary, with traders now pricing in a 100% chance of a rate hike by June and no chance of a rate cut this year, according to LSEG data [1].
The cautious stance of central banks was echoed by the U.S. Federal Reserve, which also held rates steady on Wednesday amid the escalating conflict. In corporate news, Unilever confirmed it is in talks to sell its foods business, including Hellman's Mayonnaise and Horlicks, to U.S. firm McCormick & Company. Unilever previously spun off its Magnum ice cream division into a separate company listed in Amsterdam. British pub chain J D Wetherspoon reported rising employment in its interim trading report [1].
CONCLUSION
European equities rebounded as easing oil prices and central banks' cautious approach provided relief after a week of heightened geopolitical and inflationary concerns. Traders are now betting on rate hikes from both the ECB and Bank of England later this year, reflecting ongoing uncertainty about the war's impact on inflation and economic growth. The market remains sensitive to developments in the Middle East and central bank policy signals.