PARIS (Reuters) - European markets ended the week mixed on Friday as oil advanced, buoyed by geopolitical tensions.

In Paris, the CAC 40 lost 0.16% to 8,010.83 points, while Germany's Dax slipped 0.28% and the UK's Footsie gained 0.91%, buoyed by the energy and commodities sectors.

The EuroStoxx 50 index ended the session down 0.37%, compared with a rise of 0.13% for the FTSEurofirst 300 and 0.06% for the Stoxx 600.

Rising oil prices put pressure on equity markets, with the barrel hitting its highest level since October during the session.

Oil market operators are concerned about tensions in the Middle East, as Iran has vowed revenge for the strike against its embassy in Damascus, attributed to Israel. The risk of a geopolitical clash over the weekend, when markets are closed, is prompting operators to position themselves cautiously.

While a higher barrel of oil could put pressure on business activity and complicate the outlook for companies, markets are more concerned that the rebound in crude could rekindle inflationary pressures, as price momentum surprised in the USA this week and central banks prepare to cut rates.

The more general rise in commodity prices is worrying investors: during Friday's session, copper hit its highest level since June 2022, silver hit a three-year high and gold an all-time high, buoyed by demand for safe-haven assets.

"Since the beginning of the month, the Bloomberg Commodity Total Return Index is up 4.4%, with solid gains in all sectors", except cereals, points out Ole S. Hansen, Head of Commodity Research. Hansen, Head of Commodity Research at Saxo Bank.

Markets are also repositioning themselves, with investors expecting fewer rate cuts from the Federal Reserve than expected at the start of the year.

"This week, the trends observed last week have continued: yields have risen, spreads have widened, and equities in developed markets have fallen," notes Florian Ielpo, Head of Research at Lombard Odier IM.

"The main driver of these movements was the resurgence of inflationary fears, rekindled once again by an inflation report that turned out to be stronger than expected".

OIL

Crude oil advanced, supported by geopolitical tensions, and hit a six-month high for the session.

Brent crude gained 1.28% to $90.89 a barrel, while West Texas Intermediate (WTI) advanced 1.49% to $86.29.

RATES

Yields fell sharply on both sides of the Atlantic, as investors reassessed their monetary policy expectations and bought safe-haven assets.

At the close of European fixed-income markets, the ten-year Treasury yield was down 6.3 bp at 4.5135%, compared with 7.1 bp for the two-year rate at 4.8902%.

The German ten-year yield was down 11.8 bp at 2.358%, while the two-year yield gave up 11.2 bp at 2.858%.

ON WALL STREET

Wall Street declined, with markets concerned about persistent inflation in the US and geopolitical tensions.

At the time of closing in Europe, trading on the New York Stock Exchange showed a drop of 0.78% for the Dow Jones, compared with 0.98% for the Standard & Poor's 500, and 1.02% for the Nasdaq Composite.

VALUES

Rising oil prices supported energy-related stocks, with the raw materials sector up 2.38%. TotalEnergies gained 2.05%, Engie 1.7%, BP 3.673% and Shell 3.01%.

The commodities sector advanced by 2.42%, as prices of basic resources continued to rise. In particular, Glencore gained 5.10%, one of the best performers on the Stoxx 600.

Société Générale advanced 2.1% after announcing on Friday that it had reached an agreement with Moroccan conglomerate Groupe Saham to sell two of its subsidiaries in the country, in a transaction valued at 745 million euros.

CURRENCIES

The dollar strengthens towards its best weekly performance since September 2022, while gold hits a record high, both assets benefiting from the demand for safe-haven assets.

The dollar gained 0.62% against a basket of reference currencies, while the euro shed 0.74% to $1.0645. Sterling is down 0.76% at $1.2455.

Gold climbed 0.74% to $2,390.89 an ounce, after touching a record high of $2,431.29.

TO BE CONTINUED ON MONDAY :

(Written by Corentin Chappron, edited by Sophie Louet)