European shares were flat early on Friday and on track to end the week marginally lower as uncertainty prevailed over Middle East peace efforts, with technology stocks leding declines, pausing after a blistering two-month rally.
The pan-European STOXX 600 index (.STOXX) was unchanged at 624.02 points by 0834 GMT and was down 0.3% for the week so far.
Brent crude was hovering near $95 a barrel and looked set to end the week higher, as chances of a diplomatic resolution between the U.S. and Iran looked slim with both countries trading strikes earlier in the week.
The Israel-Lebanon ceasefire also hangs in the balance as Hezbollah rejected the U.S.-brokered pact.
The uncertainty has kept energy costs elevated, and the latest data showed that euro zone inflation accelerated in May, prompting markets to price in a 25-basis-point interest rate hike by the European Central Bank next week.
"There'll be a hike next week. There'll probably be a hike in July. Thereafter, the bank will wait and see what's happening because it is all going to be about that pass-through (effect of inflation)," said Jeremy Batstone-Carr, European strategist at Raymond James.
Global tech stocks also paused this week after disappointing results from U.S.-based Broadcom (AVGO.O).
European chip stocks such as Infineon (IFXGn.DE) and Aixtron (AIXGn.DE) lost more than 5% each, while AI equipment makers Legrand (LEGD.PA) and Schneider Electric (SCHN.PA) both slipped about 1% each.
Earlier this week, the European Commission proposed laws to boost domestic cloud, AI and semiconductor industries and cut reliance on U.S. Big Tech, called the Cloud and AI Development Act and Chips Act 2.0.
"Tech is coming to Europe and will almost certainly be a story for the latter years or so of the current decade and the early years of the 2030s," Raymond James' Batstone-Carr said.
The financial services sector (.SXFP) was heading for a 1% weekly loss after rising redemption requests from asset managers reignited concerns about strains in private markets.
Among others stocks, thermal processing services company Bodycote (BOY.L) slid 11% after saying Apollo Global Management (APO.N) does not intend to make the firm a buyout offer.
Single-board computing company Raspberry Pi <RPI.L jumped 20% after raising its full-year profit forecast.
Focus is now on euro zone’s revised first-quarter growth figure and U.S. May jobs data, due later in the day.
