European and UK equity markets fell sharply on Friday, dragged lower by renewed US-Iran hostilities and a surge in oil prices above $100 a barrel, but the cryptocurrency market showed remarkable poise, with Bitcoin and other major digital assets holding steady.
The pan-European STOXX Europe 600 dropped 0.8% to 611.69 points, Germany’s DAX fell 0.9%, and London’s FTSE 100 slipped 0.5% by mid-session. The declines were fueled by fears that escalating conflict in the Gulf could disrupt crude supplies and keep energy costs elevated, adding to inflation concerns across the region.
Rising oil and trade uncertainty
Crude prices climbed back above $100 per barrel after US and Iranian forces exchanged fire, casting doubt on a fragile month-old ceasefire. Although President Trump later stated the truce remained in effect, investors remained on edge, pricing in a higher-for-longer interest rate environment. Three or more rate hikes from the European Central Bank are now fully priced in for the coming year.
Additional pressure came from Trump’s warning that the European Union could face “much higher” tariffs if trade deal commitments are not met by July 4. The twin threats—geopolitical turmoil and protectionist trade policy—pushed European equities toward a third consecutive weekly decline.
Crypto decouples from risk assets
Against this backdrop, Bitcoin and Ethereum traded within narrow ranges, showing little correlation with the sell-off in stocks. Analysts pointed to signs that digital assets are increasingly viewed as a non-sovereign store of value in times of geopolitical stress, though liquidity remained thin. The market capitalization of all cryptocurrencies hovered near $3.5 trillion, essentially flat on the day.
While no single token posted outsized gains, the overall stability suggested that crypto may be maturing into a hedge against macroeconomic instability. “We’re seeing a notable divergence,” said one London-based trader. “Equities are pricing in stagflation, but crypto is holding up better than expected.”
Traditional market pain points
The equity sell-off was broad, but sectors directly exposed to fuel costs suffered most. International Airlines Group (IAG), parent of British Airways, tumbled 5.2% in European trading (and 2.1% in London) after warning annual profit would miss forecasts, citing a €2 billion jump in jet fuel costs for 2026. Conversely, travel tech firm Amadeus IT Group rose 3.7% on better-than-expected quarterly earnings.
UK markets also grappled with domestic political uncertainty after local elections saw heavy losses for Prime Minister Starmer’s Labour Party, raising the risk of a leadership challenge. Bank of America strategists noted that “risks of a leadership challenge can rise post the May local elections,” which could lead to higher borrowing expectations.
Meanwhile, the ECB released a report urging deeper financial integration in the euro zone, arguing that a single market for financial services could channel more household savings into investments. But the immediate focus remained fixed on the US jobs report later in the day, which may shape expectations for global monetary policy.
For now, the crypto market appears to be an oasis of calm amid a sea of traditional market turmoil.
