German shares ended Thursday in the red, with the blue-chip DAX index losing 0.53%, as the market evaluated fresh preliminary private sector data against the latest updates on the US-Iran conflict.
Business survey data from S&P Global showed German private sector activity contracting for a second consecutive month, with the Flash Germany Composite PMI Output Index rising to a two-month high of 48.6 in May, above the previous and expected 48.4. The reading was driven by weakness in the services sector amid sluggish demand and rising cost pressures.
The flash composite PMI for the eurozone also contracted for the second month in a row, with the index hitting a 31-month low of 47.5 in May, compared with the earlier reading and consensus estimate of 48.8, as rising costs led to steeper declines in output and new business.
"While the markets' focus is still mainly on the inflationary impact of the war, today's eurozone PMI confirms that the growth impact is not to be overlooked... As the Middle East conflict remains unresolved right now, the negative impact of the energy shock on the eurozone economy is clearly increasing. That makes this time different from the previous energy shock. Without ample government support in place and without the vibrant reopening of the service sector as lockdowns ended, like in 2022, the negative impact on growth could be more pronounced," ING wrote.
Pakistan is reportedly stepping up mediation efforts amid rising US-Iran tensions, Reuters reported, citing unnamed sources. Pakistan Army Chief Asim Munir is said to be considering a diplomatic visit to Tehran, while Iranian sources told the outlet that Tehran has hardened its nuclear stance by refusing to export near-weapons-grade uranium. US President Donald Trump also threatened immediate military action if Washington's demands are not met.
Against this backdrop, the European Commission's Spring 2026 Economic Forecast cut the eurozone's growth outlook while raising inflation projections, citing a slowdown driven in part by energy shocks linked to the Middle East conflict. GDP is now expected to expand by 0.9% in 2026 and 1.2% in 2027, down from prior forecasts of 1.2% and 1.4%, respectively. Inflation outlook was revised up to 3% for 2026 and 2.3% for 2027, compared with earlier estimates of 1.9% and 2%.
On the corporate side, DHL Supply Chain, a subsidiary of Deutsche Post (DHL.F), d/b/a DHL Group, began construction of a 17,000-square-meter European battery logistics center in Holtum, Netherlands. Expected to begin operations in early 2027, the facility will provide specialized storage and service space for high-voltage batteries required by electric vehicles and battery energy storage systems across Europe. The logistics group was down 0.37% at closing.