European stocks fell on Friday as investors grappled with uncertainty over the duration of war in Iran, which has disrupted global energy supplies and spurred inflation fears that have upended the outlook for interest rates.

The price of oil - which has surged 40% since the onset of the war - remained just above $100 per barrel at its highest level since mid-2022. Prices moderated somewhat on Friday after the U.S. issued a 30-day license for countries to buy sanctioned Russian oil and petroleum products that were stranded at sea.

Europe's STOXX 600 fell 0.6% in early trading, putting the index on track for a 6.1% fall in March so far - its biggest two-week decline in a year.

U.S. futures were subdued, with S&P 500 e-minis off 0.1% following steep declines on Thursday that saw the S&P 500 close 1.5% lower.

Meanwhile the U.S. dollar has become the safe-haven of choice during the tumult, putting most other currencies under pressure. The dollar was set for a second consecutive week of gains and is up 2.5% since the war broke out at the end of February.

Wolf von Rotberg, equity strategist at Bank J. Safra Sarasin in Zurich, said there was a sense of urgency in markets around the duration of the conflict.

"If we don't make any progress and just have a status quo for a prolonged period ... that would obviously mean that oil prices stay higher for longer, and we have a more pronounced impact on the economy and on inflation," he said.

Brent crude oil futures were last up 0.8% at $100.30 a barrel, while West Texas Intermediate crude was at $95.98 a barrel. Both had hovered around $60 at the start of 2026.

Traders are trying to predict how long the disruption to oil supplies will last, based on the latest news about the war.

"Headlines are coming at the market like water from a fire hose, which is impacting the price of oil, and consequently, financial markets," said Mitch Reznick, group head of fixed income at Federated Hermes.

With Iran stepping up attacks across the Middle East as its new Supreme Leader Mojtaba Khamenei vowed to keep the Strait of Hormuz shipping lane closed, investors are bracing for a prolonged conflict and higher oil prices.

The specter of rising inflation has led markets to rapidly reprice what they expect from central banks this year, with traders now anticipating just 20 basis points of easing from the Federal Reserve compared to 50 bps of cuts priced in last month.

Two-year Treasury yields, which typically move in step with Fed interest rate expectations, scaled a six-month high on Thursday.

"With the possibility of higher oil prices still elevated, investors should be prepared for continued volatility and potentially further downside in the near term," said Vasu Menon, managing director of investment strategy at OCBC in Singapore.

Jose Torres, senior economist at Interactive Brokers, said the impact of rising oil prices on corporate margins, inflation expectations, rate-cut prospects and yields is sparking volatility, leaving participants with few places to hide.

"Indeed, sinking optimism about Fed rate reductions amid strengthening cost pressures is weighing on traditional safe havens such as silver, gold, and government debt."

The two-year note yield eased 2 bps to 3.74% after hitting its highest level since Aug. 22 on Thursday. The yield has gained about 35 bps in the two weeks since the war started.

Investor focus will switch to a slate of policy meetings next week with the Fed, the Bank of Japan, the European Central Bank and the Bank of England all due to meet, with most expected to keep rates unchanged. The Reserve Bank of Australia is broadly expected to hike rates next week.

The yen hit its weakest level since July 2024 at 159.69 per U.S. dollar on Friday as Japan warned that it was ready to take action to protect against yen declines. It was last at 159.41.

Analysts said the bar for intervention is higher this time around as any intervention now could prove futile in the face of the relentless dollar buying.

In currencies, the euro fell 0.5% to $1.14575, on course for a weekly decline of nearly 1.4%. The dollar index was at 100.1, set for about a 1% weekly advance.

Gold was 0.2% higher at $5,088.4 per ounce on Friday but set for a 1% drop for the week.