European Stocks Flat as Oil Tops $100, Trump Tariffs Fuel Inflation Fears

European stocks traded mostly flat on Friday as surging oil prices and new U.S. tariff measures offset support from corporate earnings, increasing concerns that major central banks could keep interest rates higher for longer.

The pan-European STOXX 600 index struggled to gain momentum as investors reacted to escalating geopolitical tensions in the Middle East and renewed trade uncertainty. Brent crude climbed more than 7% to trade above $100 per barrel for the first time in months after President Donald Trump warned of major military action against Iran and Yemen’s Houthi forces following attacks on commercial tankers in the Red Sea and Persian Gulf. The sharp jump in oil prices raised fears of renewed inflationary pressure across energy-dependent European economies.

Investor sentiment was also weighed down after the Trump administration imposed new tariffs ranging from 10% to 12.5% on imports from 60 trading partners, including the European Union. The measures, introduced over concerns about forced-labor enforcement, replaced an expiring 10% global tariff and added fresh pressure on European exporters already facing weak global demand and higher shipping costs.

The combination of rising energy prices and trade tensions pushed Eurozone government bond yields to multi-year highs, reinforcing expectations that both the European Central Bank and the U.S. Federal Reserve may need to tighten monetary policy further to contain inflation.

Markets are now awaiting the release of flash Eurozone Purchasing Managers’ Index (PMI) data, which is expected to show business activity remaining subdued as elevated borrowing costs and higher input prices continue to weigh on growth.

Germany’s DAX gained 0.5%, Italy’s FTSE MIB advanced 0.2%, while France’s CAC 40 and the UK’s FTSE 100 slipped 0.1%. Energy giants such as Shell and BP helped cushion broader market losses, although weakness in technology stocks limited gains after disappointing earnings and spending concerns from major global companies.

Among individual movers, Ubisoft dropped 4% after reporting first-quarter sales, while Volkswagen shares fell 3% following its latest quarterly earnings and outlook. Investors continue to favor defensive, cash-generating sectors as uncertainty over inflation, energy prices, and central bank policy remains elevated.