European markets delivered a mixed performance on July 17, as crude oil prices spiked against a backdrop of escalating military tensions between the United States and Iran. Energy-related stocks attracted buyers, while selling pressure was notably concentrated in technology and luxury brand shares. In bond markets, yields surged through the week—prices fell—on renewed inflation fears tied to Middle East risks, though the upward momentum in yields paused heading into the weekend as safe-haven buying emerged.

Resource Stocks Firm in London; Mid-Caps Retreat

In London equity markets, the FTSE 100 closed at 10,600.37, up 28.13 points, or 0.27%, extending its winning streak. Rising crude oil futures lifted the FTSE 350 Oil & Gas index by 2.08%, providing a tailwind for the broader market. Defensive sectors also drew inflows, with the Utilities index up 2.66% and the Food, Beverage & Tobacco index gaining 1.61%.

In contrast, the mid-cap FTSE 250 index fell 0.47%, snapping a six-session winning streak. On a weekly basis, the FTSE 100 rose 0.98% and the FTSE 250 advanced 1.00%.

Among individual stocks, luxury brand Burberry plunged 6.4%, as intensifying Middle East tensions were seen as a threat to tourist spending across Europe. The Personal Goods index tumbled 4.96%. Financials were also soft, with the Banks index down 0.43% and the Investment Banking & Brokerage index off 1.46%.

On the political front, the United Kingdom’s ruling Labour Party elected former Manchester Mayor Andy Burnham as its new leader. With the populist Reform UK party gaining ground, Burnham is expected to become the country’s seventh prime minister in a decade.

Tech Weakness Weighs on Broader Europe; Swedish Stocks Diverge

Across pan-European equity markets, the STOXX Europe 600 index slipped 2.20 points, or 0.34%, to 641.53, edging lower in a modest pullback. A global sell-off in technology shares spilled over into the region, with the STOXX Europe 600 Technology index dropping 2.41% and dragging on the benchmark. The tech gauge fell 3.27% for the week. Luxury stocks also faced selling, with the STOXX Europe Luxury 10 index down 1.63%. The STOXX 600 managed to eke out a weekly gain of just 0.07%, barely holding in positive territory.

Despite rising oil prices and corporate earnings optimism, a cautious mood prevailed ahead of the European Central Bank’s policy meeting next week.

Swedish stocks saw sharp divergence. Defense contractor Saab surged 9.7% after reporting April-June 2026 operating profit that exceeded market expectations. Meanwhile, Swedish commercial vehicle giant Volvo slipped 0.6% on profit-taking, even after posting higher earnings. Investment firm EQT soared 11.0%, despite having its takeover bid for an Australian company rejected.

Eurozone Yields Surge for the Week; Additional ECB Rate Hike Expectations Emerge

In eurozone bond markets, yields spiked over the week as the renewed outbreak of fighting in the Middle East and the resulting crude oil price surge strengthened the view that the ECB will deliver multiple additional rate hikes this year.

Crude oil prices jumped 13% this week. With the Strait of Hormuz effectively blockaded, Brent crude futures briefly touched their highest level in a month. Markets are now pricing in roughly a 72% probability that the ECB will implement another rate hike this year beyond the expected September increase.

Germany’s 2-year yield, which is highly sensitive to ECB policy rate expectations, traded at 2.77% on July 17, up 1 basis point on the day, but up a sharp 10 basis points for the week. According to Investing.com, the yield briefly touched 2.799% midweek, its highest level since 2024.

Elsewhere, the benchmark German 10-year yield rose 8.5 basis points for the week to trade at 3.142% as of July 17, though it edged slightly lower on the day amid safe-haven buying. France’s 10-year yield rose by a similar magnitude, while Italy’s 10-year yield surged 14 basis points, reflecting heavier selling pressure on Southern European sovereign bonds.

Currency and Commodity Market Moves

In foreign exchange markets, late in the European session, the euro traded at $1.1439, the dollar at 162.42 yen, and the euro at 185.82 yen—all roughly flat from late Asian trading levels.

The afternoon gold fix for spot bullion stood at $3,995.35.

Market Perspective and the Week Ahead

The bond sell-off was triggered by concerns that a supply-side energy shock could erode disinflationary momentum and force central banks into more aggressive policy responses. Heading into the weekend, however, safe-haven buying of bonds emerged, capping the rise in yields.

Market attention is now squarely focused on the ECB’s policy meeting next week. With energy costs having surged 20% over the past month, significant uncertainty now clouds the previously prevailing outlook for a policy rate hold. Bond markets are already aggressively pricing in the probability of an additional rate hike this autumn, making ECB President Christine Lagarde’s post-meeting press conference a critical moment for gauging whether the central bank prioritizes inflation control or the eurozone’s slowing economy.