European stocks bounced back on Friday at the end of another tumultuous week, as oil prices eased and investors weighed the cautious tone struck by central banks across the continent in the previous session.

Shortly after the opening bell, the Stoxx 600 rose by 0.9%, while Germany’s DAX and the French CAC 40 were up 1.4% and 0.9% respectively. The blue-chip FTSE 100 was 0.6% higher in early morning trade.

All sectors besides oil and gas were in the green, with banks and construction stocks leading the rebound.

Friday brought a sense of relief to markets after regional stocks closed sharply lower on Thursday, as further escalation in the U.S.-Iran war raised concerns that an energy shock could put inflationary pressure on the global economy. Oil prices briefly touched $119 a barrel, fueling a risk-off sentiment that sparked a sell-off across most asset classes.  

On Friday morning, oil prices fell after U.S. Treasury Secretary Scott Bessent said Washington may lift sanctions on Iranian crude stored aboard tankers in a bid to cool energy costs.

It came after central banks across Europe held interest rates steady this week, citing the Iran war as a new source of uncertainty for the inflation outlook.

The European Central Bank said the conflict had created “upside risks for inflation and downside risks for economic growth,” prompting traders to up bets on potential ECB rate hikes later this year.

But ECB policymakers noted that uncertainty hung over the longer-term impact of the war, with its influence on inflation depending on both the duration of the conflict and the impact of energy volatility on consumer prices and the economy.

Investors are now 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, with policymakers saying they were “ready to act” to offset the effects of the war – again prompting an increase in bets on rate hikes later this year.

Traders are pricing in a 100% chance of a rate hike from the Bank of England by June, according to LSEG data. The chance of a cut this year, according to markets, is now zero.

Both the Swiss National Bank and Sweden’s Riksbank also held rates steady, citing uncertainty around the war in the Middle East. The decisions followed a hold from the U.S. Federal Reserve on Wednesday, which also took a cautious approach amid the escalating conflict.

In corporate news, consumer goods giant Unilever confirmed on Friday it was in talks about selling its foods business, which includes Hellman’s Mayonnaise and Horlicks, to U.S. firm McCormick & Company. Last year, Unilever spun off its Magnum ice cream division into a separate company that is now listed in Amsterdam.

British pub chain J D Wetherspoon said in an interim trading report on Friday that rising employment and energy costs, as well as “considerable pressure on consumer finances,” may result in profits below consensus estimates this year.

Meanwhile, news agency Reuters reported on Friday that Thyssenkrupp’s Deputy Chairman Juergen ⁠Kerner said talks to sell the company’s steel unit to India’s Jindal Steel were “not moving forward.”