European shares inched higher on Friday, aided by gains in energy and healthcare stocks as investors remained cautious after U.S.-Iran negotiations to end the Middle conflict stalled.
The pan-European STOXX 600 index (.STOXX) inched up 0.2% by 0841 GMT, with Germany's DAX (.GDAXI) and France's CAC 40 (.FCHI) rising 0.3% each, outperforming other regional markets.
Still, the mood was far from upbeat as Switzerland said U.S. talks with Iranian negotiators would not take place on Friday, as Vice President JD Vance dropped plans to travel to the country, adding to uncertainty whether a lasting truce can be found.
Oil prices edged higher, helping drive European oil & energy stocks (.SXEP) up 1.2%.
Healthcare stocks such Novo Nordisk (NOVOb.CO) and AstraZeneca (AZN.L) were among the top boosts to the STOXX 600 as investors moved into sectors seen as safer during times of uncertainty.
"The reopening is only partially reflected in EU equities rotations and breadth, as investors await deal execution," Morgan Stanley analysts said in a note, while downgrading energy stocks to "equal weight" from "overweight".
The region's stocks had rallied to record highs earlier this week, driven by signs of progress in the U.S.-Iran peace talks and a gradual reopening of the Strait of Hormuz, a vital artery for global energy supplies.
The STOXX 600 index is set for a second straight week of gains, with banks outperforming as geopolitical tensions largely ease.
Data showed German producer prices rose less than expected in May, rising by 2.2% on the year, a relief for investors worried that high energy costs will feed inflation.
The European Central Bank last week raised interest rates for the first time in nearly three years, but policymakers expect a pause at their next meeting in July as the more likely scenario.
On the day, Entain (ENT.L) climbed 1.6% after Reuters reported the Ladbrokes-owner has begun exploring options for its joint venture in Central and Eastern Europe, including a possible sale.
ASML (ASML.AS) dipped 1.5% after Bloomberg reported U.S. Commerce Secretary Howard Lutnick told the company that Washington is concerned that one of its top chipmaking machines may have found its way to China in violation of U.S.-led export restrictions.
