The Spanish blue-chip index was once again weighed down by intensifying geopolitical tensions in the Middle East, where optimism for a resolution appears to be fading, while energy supply disruptions keep markets on high alert.
The situation in the Strait of Hormuz, a critical artery for global fossil fuel distribution, remains the primary focus of concern. Tensions spiked following the release of footage showing Iranian commandos intercepting a cargo ship in the area, a move that prompted U.S. President Donald Trump to order the U.S. Navy to 'shoot and kill' any Iranian vessel laying mines in the strait.
These developments are overshadowing recent diplomatic overtures. Although Trump had suggested an indefinite extension of a previous ceasefire to facilitate talks, the reality on the ground remains defined by a stalemate in peace negotiations between Washington and Tehran.
The market ignored the extension of the truce agreed between Lebanon and Israel, with Brent crude holding above 105 dollars due to supply interruptions.
'Yesterday's announcement of a three-week extension to the Israel-Lebanon ceasefire is a positive factor, although the Strait of Hormuz remains closed and Brent crude is holding at the 105 dollar level,' Bankinter analysts noted in their morning briefing.
'For now, the ceasefire (between the U.S. and Iran) is indefinite, but the key point is that the reopening of the strait (by Iran) is unlikely to occur until the (U.S.) naval blockade of Iran is lifted,' they added.
Meanwhile, on the corporate front, quarterly earnings provided a positive counterpoint to geopolitical instability. German tech giant SAP beat expectations on the back of cloud growth, as did Swiss cement maker Holcim, which reaffirmed its full-year targets.
On the macroeconomic front, the market is looking for signs of economic fallout from the conflict via the German Ifo index (0800 GMT) and the University of Michigan consumer sentiment index in the United States (1400 GMT).
At 0702 GMT on Friday, Spain's benchmark IBEX 35 was down 138.90 points, or 0.78%, at 17,747.00 points, while the FTSE Eurofirst 300 index of leading European shares retreated 0.58%.
For the week as a whole, the IBEX 35 has accumulated a decline of 3.99%.
In the banking sector, Santander lost 1.38%, BBVA fell 0.94%, Caixabank shed 0.86%, Sabadell dropped 0.66%, Bankinter slipped 1.13%, and Unicaja Banco lost 1.72%.
Among non-financial heavyweights, Telefónica gained 0.21%, Inditex shed 1.16%, Iberdrola fell 0.30%, Cellnex dropped 0.49%, and oil major Repsol rose 0.52%.
(Reporting by Tomás Cobos; editing by Benjamín Mejías Valencia)
