European Markets Slip as Greenland Standoff and Geopolitical Risks Weigh on Sentiment

European equities closed the week on a softer footing on Friday, with investors remaining cautious amid mounting geopolitical uncertainty, particularly surrounding the future of Greenland and the stability of transatlantic alliances.

By mid-morning in Europe, Germany’s DAX dipped 0.1%, France’s CAC 40 fell 0.2%, and the U.K.’s FTSE 100 eased 0.1%, extending a hesitant tone across the region.

The mood has been shaped in large part by the unresolved standoff between Washington and Copenhagen over Greenland. Talks earlier this week between senior U.S. officials and Danish and Greenlandic ministers failed to produce a breakthrough, with Danish Prime Minister Mette Frederiksen reiterating that a “fundamental disagreement” remains after President Donald Trump renewed his insistence that the United States “needs” the strategically located Arctic territory.

Frederiksen warned that a serious rift over Greenland could threaten the cohesion of NATO itself — a scenario that has unsettled markets. Fitch’s head of sovereign ratings, James Longsdon, said this week that a weakening of the alliance could prompt one-notch downgrades for some European sovereign credit ratings. He noted that countries closer to Russia would be most vulnerable in such an assessment.

In response to the tensions, several European nations, including Germany, France, Norway and Sweden, have begun deploying troops to Greenland in a show of support for Denmark.

On the data front, German inflation figures offered little reassurance. Consumer prices were unchanged in December, rising just 1.8% year-on-year — below the European Central Bank’s 2% medium-term target. With growth holding up better than expected and inflation no longer a pressing concern, the ECB has signaled little urgency to adjust policy after pausing its rate-cut cycle in June. The central bank’s next meeting is scheduled for early February.

Corporate news was light, but semiconductor stocks remained in focus following strong results from Taiwan Semiconductor Manufacturing on Thursday. The chipmaking giant highlighted continued strength in artificial intelligence-driven demand, lifting sentiment across Europe’s tech supply chain. Shares in ASML, ASM International and BE Semiconductor all posted strong gains in the previous session on the back of the upbeat outlook.

In commodities, oil prices edged slightly higher, stabilizing after steep losses a day earlier. Brent crude rose 0.1% to $63.85 a barrel, while U.S. West Texas Intermediate gained 0.2% to $59.30.

Crude had tumbled more than 4% in the prior session after President Trump said Iran’s crackdown on protesters was easing, reducing fears of an imminent U.S. military strike that could disrupt supplies. Even so, oil benchmarks are on track to end the week broadly flat, after touching multi-month highs earlier in the week when unrest in Iran first escalated.

With geopolitical risks still unresolved and little in the way of fresh catalysts, European markets appear set to remain cautious as the new week approaches.