The IBEX 35 opened Thursday's session with a moderate decline, following comments from the U.S. central bank that dampened hopes for interest rate cuts, while fears of potential U.S. intervention in the Israel-Iran conflict urged investors to remain cautious.

The drop pushed the Spanish stock index below 13,900 points, moving it further from the 14,000-point level, which it had reclaimed in mid-May after seventeen years below that threshold.

On Wednesday, the Federal Reserve kept its benchmark interest rate unchanged, as expected, and its policymakers lowered projections for future rate cuts due to the possibility of rising inflation, amid ongoing uncertainty over tariff plans proposed by the Trump administration.

This disappointment was compounded by geopolitical tensions, with the possibility of the United States joining Israel's bombing campaign against Iran. This concern represents an "upside risk for oil prices, with inflationary implications and obstacles to future rate cuts," according to a report from brokerage Renta 4.

Against this backdrop, and with Wall Street closed for the "Juneteenth" holiday (Emancipation Day), investors are not expected to significantly adjust their positions during the session, unless new geopolitical developments arise.

On the macroeconomic and monetary agenda, the only major reference will be the Bank of England's interest rate announcement. The central bank appears set to keep rates at their current level while assessing whether the economy and inflation continue to weaken, or if the country will be hit by an energy price shock stemming from the Israel-Iran conflict.

At 0702 GMT on Thursday, Spain's IBEX 35 index was down 55.80 points, or 0.40%, at 13,867.40 points, while the pan-European blue-chip FTSE Eurofirst 300 index slipped 0.41%.

In the banking sector, Santander lost 0.69%, BBVA fell 0.50%, Caixabank was down 0.41%, Sabadell dropped 0.43%, Bankinter slipped 0.36%, and Unicaja Banco lost 0.63%.

Among major non-financial stocks, Telefónica declined 0.55%, Inditex shed 0.32%, Iberdrola gained 0.15%, Cellnex dropped 0.70%, and oil company Repsol rose 0.96%.

(Reporting by Tomás Cobos; editing by Benjamín Mejías Valencia)