Rolls-Royce confident on profits despite Mideast war disruption

Germany's struggling economy expanded slightly faster than expected at the start of the year, data showed Thursday, but the positive momentum could be derailed by the Iran war energy shock.

Output in Europe's biggest economy rose 0.3 percent from January to March compared to the previous quarter, according to provisional data from statistics agency Destatis. 

Analysts surveyed by financial data firm FactSet had forecast growth of 0.2 percent. The data covered just the first month of the US-Israeli war against Iran, which began at the end of February.

The expansion was driven by growth in exports as well as higher consumer and government spending, Destatis said. 

Sebastian Wanke, an economist at German public lender KfW, said it was a "surprisingly strong start to the year", particularly given the global geopolitical turmoil. 

"But the war in Iran is now casting a shadow over the outlook," he added.

Growth for the fourth quarter of 2025 was however revised down to 0.2 percent, from 0.3 percent previously.

The export-driven German economy has struggled in recent years due to a manufacturing slump, high energy costs, and fierce competition, in particular from China.

It eked out meagre growth in 2025 following two straight years of recession.

Hopes had been high for a strong rebound this year driven by a public spending blitz and reforms pushed by Chancellor Friedrich Merz, but the Iran war has dimmed those expectations.

The government last week halved its growth forecast for 2026, and now expects gross domestic product to expand just 0.5 percent in 2026.

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The UK government on Thursday announced an extra £25 million ($33 million) for security outside synagogues and schools, a day after two Jews were stabbed in the latest attack on the community.

Two men were knifed in the street in broad daylight in Golders Green in north London on Wednesday.

There have been arson attacks on synagogues and other Jewish sites in the area and a deadly attack in which two people died at a synagogue in Manchester last year.

"People have a sense of deep insecurity... and that is why the government is bringing forward investment, an additional £25 million to invest in the security of our Jewish community," interior minister Shabana Mahmood told Sky News.

"That will pay for more protective security for our Jewish synagogues, schools, places of worship, community centres," she added.

A 45-year-old man, a British national who was born in Somalia and came to the UK as a child, remains in custody following the stabbings.

The victims -- aged 76 and 34 -- were in a stable condition in hospital.

Rabbi Ben Kurzer, of the Golders Green Synagogue, called on the government to do more to protect Britain's Jews.

"There is definitely not a significant police presence on a regular basis in these areas. We have little bits here and there, but most of the security that we're seeing is private," he told BBC Radio.

- 'Cumulative impact' -

A little-known group believed to be linked to Iran, and which has claimed responsibility for the London arson attacks, said one of its "lone wolves" was behind the stabbings, the SITE Intelligence Group reported.

Harakat Ashab al-Yamin al-Islamiya (HAYI) -- meaning The Islamic Movement of the People of the Right Hand -- made the uncorroborated claim in a video posted online, according to SITE.

Mahmood said the government would legislate to deal with "a gap in the law when it comes to organisations that may be linked to hostile states" and their proxies.

The government would be "fast tracking that legislation in the coming weeks", she said.

Kurzer also urged ministers to take action on pro-Palestine marches which he said were fuelling the attacks.

"I think they are hate marchers... We all believe in free speech, but there's obviously a limit to free speech when it's leading to events such as we had yesterday," he said.

Last year the government of Labour Prime Minister Keir Starmer announced it would give police greater powers to restrict protests.

They were aimed at allowing police to take into account the "cumulative impact" of frequent protests.

Monitoring groups have reported a surge in antisemitic and Islamophobic incidents in Britain, particularly since the start of the war between Israel and Hamas in Gaza.

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Iran warned the United States on Thursday that its naval blockade was doomed to fail, after President Donald Trump signalled it could be enforced for months to come, in a confrontation wreaking havoc on global energy markets. 

Oil prices soared to a four-year high, with Brent crude for June delivery up 7.1 percent to more than $126 dollars a barrel, and Iran's President Masoud Pezeshkian responded with a warning that the action would only further destabilise the region.

The United States imposed a blockade on Iran's ports, while the Islamic republic has maintained its stranglehold over the strategic Strait of Hormuz since the start of the Middle East war in February.

"Any attempt to impose a maritime blockade or restrictions is contrary to international law... and is doomed to fail," Pezeshkian said, in a statement that warned the blockade that began on April 13 would be "a disruption to lasting stability in the Persian Gulf".

Trump is expected to receive a briefing on Thursday on new plans for potential military action in Iran from Admiral Brad Cooper, the head of US Central Command, two sources with knowledge of US planning told news platform Axios.

This week Trump has reportedly told oil executives and national security officials to prepare for a long US blockade designed to force Tehran to surrender its nuclear programme, and, speaking to Axios, said: "They are choking like a stuffed pig. And it is going to be worse for them."

US Central Command (CENTCOM) said Wednesday in a social media post that it had reached a "significant milestone after successfully redirecting the 42nd commercial vessel attempting to violate the blockade".

It said there are "41 tankers with 69 million barrels of oil that the Iranian regime can't sell", estimating the value at more than $6 billion.

Trump faces domestic political pressure to end the war, which is unpopular even with much of his base, has increased costs for American consumers and has unnerved US allies. 

Iran's economy is also suffering and the rial has fallen to historic lows against the dollar.  

Iran has sought to extract a price for being attacked by exerting control over the Strait of Hormuz, the narrow waterway through which about one-fifth of global oil typically transits.

- 'The issue is always nuclear' -

Top US officials, including Vice President JD Vance, twice turned back last week from trips to Pakistan to negotiate with Iran.

US officials contend they do not know who is speaking for Iran, whether it is the hardline and increasingly empowered Revolutionary Guards or diplomats, after Israeli strikes killed a series of top leaders.

Tehran residents speaking to AFP journalists in Paris reported a sense of despair.

"Every time in recent years that negotiations have taken place, the economic situation of the people has only gotten worse. Sanctions have either started or intensified," a 52-year-old architect told AFP, speaking on condition of anonymity. 

"The issue is always nuclear. There's no talk about people, the economy or freedom. People have the right to not even want to hear the word 'negotiation'," he said.

- 'Collapse' -

Iran proposed easing its chokehold over the Strait of Hormuz if Washington lifts its blockade and broader negotiations take place. 

But the Trump administration has insisted that Iran's nuclear programme be on the table.

Iran's parliament speaker Mohammad Bagher Ghalibaf, who has emerged as a key figure since the start of the war, said Wednesday the US naval blockade of the country aimed to create division and "make us collapse from within".

Violence has continued on the war's Lebanese front, despite a recently extended ceasefire between Israel and Hezbollah, the Iran-backed armed group that drew Lebanon into the war by firing rockets at Israel. Israel responded with strikes and a ground invasion.

For the first time since the ceasefire began, the Lebanese army said on Tuesday that an Israeli strike had targeted its troops, wounding two soldiers in the south. Another strike on Wednesday killed a Lebanese soldier, it said.

"Israel must finally realise that the only path to security is through negotiations, but it must first fully implement the ceasefire in order to move on to negotiations," Lebanese President Joseph Aoun said.

A UN-backed report said Wednesday more than 1.2 million people in Lebanon were expected to face acute hunger due to the latest war.

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Air France-KLM cut back its 2026 outlook as it said higher fuel prices caused by the Middle East war would weigh down its fuel bill by more than a third.

The airline group which also includes budget airline Transavia said it now expects to expand capacity by two to four percent this year, down from its earlier forecast of three to five percent.

Air France-KLM announced a net loss of 252 million euros ($294 million) in the first quarter, an increase of one percent from the same period last year.

"While fuel price increases are not yet reflected in the results we present today, they are expected to weigh on the coming quarters," said chief executive Benjamin Smith.

The war triggered by US and Israeli attacks on Iran at the end of February has nearly halted shipping traffic via the Strait of Hormuz, through which around a fifth of the world's oil normally passes.

Jet fuel prices more than doubled in the first few weeks of the war.

Air France-KLM, like many other European airlines, tries to cushion the impact of price swings by locking in supplies in advance, and said didn't feel the impact in March.

Despite this the airline group said it expects to add 2.4 billion euros to its annual fuel costs, with 1.1 billion in this quarter.

Like other airline groups, Air France-KLM said it had increased fare prices to compensate.

Air France, KLM and Transavia have relatively little exposure to the Middle East, where disruptions due to air travel were the most severe.

The group said other markets held up well.

Revenues rose by 4.4 percent to nearly 7.5 billion euros during the quarter, just beating analyst expectations compiled by financial data provider Factset.

It carried 22.3 million passengers, an increase of 2.3 percent, and increased seat occupancy by 0.3 percentage points to 86.3 percent.

Shares in Air France-KLM rose 1.3 percent in morning trading in Paris while the blue-chip CAC 40 index was down 1.1 percent overall.

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Thai authorities arrested a teenager at a Bangkok airport for allegedly smuggling 30 protected tortoises valued at about $9,000 that were taped under her clothing, wildlife officials said Wednesday.

Thailand is a major transit hub for wildlife smugglers who often sell highly prized endangered animals on the lucrative black market in Asia.

Authorities became suspicious of the 19-year-old Taiwanese woman's unusual movements as she prepared to board a flight to Taipei early Tuesday, Thailand's wildlife conservation department said in a statement.

A search at Suvarnabhumi airport's departure terminal uncovered the Indian star tortoises -- 29 alive and one dead -- strapped to her body, the department said.

"The suspect had used adhesive tape to immobilise the animals, packed them into cloth bags and attached them to her body to evade detection," it added.

The Thai customs department said the tortoises -- protected under the Convention on International Trade in Endangered Species (CITES) -- commanded a high price on the black market, placing their total estimated value at around $9,000.

The woman was charged with illegally transporting animals and evading customs controls.

Authorities said they were investigating whether she was part of a wider smuggling network.

Indian star tortoises are classified as a vulnerable species by the International Union for the Conservation of Nature (ICUN), which says they have been targeted to meet international demand for use as "exotic pets".

The surviving tortoises were transferred to wildlife conservation officials for care and to serve as evidence.

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Volkswagen's future is at risk without further cost-cuts, the ailing German auto giant warned Thursday after profits plunged more than feared as headwinds mount.

The carmaker is struggling with Chinese competition, US tariffs and patchy demand for electric vehicles, and already has plans to axe 50,000 jobs across all its brands in Germany by 2030.

From January to March, the group's net profit slid 28 percent to 1.56 billion euros ($1.8 billion) and revenues dropped to 76 billion euros, worse than analyst forecasts.

"The cost reductions planned so far are not enough," said VW chief financial officer Arno Antlitz. 

"We need to fundamentally change our business model and achieve structural, sustainable improvements -- in all areas and at all levels. If we fail to do that, we will jeopardise our future."

VW, whose 10 brands range from Audio to Seat and Skoda, would have to adjust its capacity and "work on further optimising costs at our plants," he said. 

Chinese automakers were not just competing on their home turf but also gaining market share in Europe, he warned. 

Carmakers like BYD have emerged as fierce rivals to Volkswagen in China, traditionally a key source of profits for the German manufacturer, particularly when it comes to EVs. 

- 'Fundamental change' -

Antlitz also said that US President Donald Trump's tariffs, introduced a year ago, were burdening the group with an extra four billion euros in costs annually. 

Volkswagen delivered just over two million vehicles in the first quarter, down four percent from a year earlier. 

Overall deliveries slid 15 percent in China, with deliveries of EVs down 64 percent. Deliveries were down 13 percent in North America.

The group is forecasting sales to grow between zero and three percent in 2026, and for its core profit margin to come in between four and 5.5 percent. 

Possible impacts of the war in the Middle East were not included in the forecasts, as they cannot be reliably assessed, Volkswagen said. 

The woes of Volkswagen, one of Germany's best known companies, reflect a broader malaise in Europe's biggest economy, particularly among its traditional manufacturers.

The company's annual profits slid to their lowest level in almost a decade in 2025. 

On Thursday CEO Oliver Blume said VW needed to align its strategy to a new world that was "undergoing fundamental change".

"Wars, geopolitical tensions, trade barriers, tighter regulation, and intense competition are creating headwinds," he said. 

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British engine-maker Rolls-Royce maintained its full-year profit guidance on Thursday, as it expects to "fully mitigate" disruption from the Middle East war. 

Rolls-Royce supplies engines to the world's biggest aircraft manufacturers Airbus and Boeing, leaving it exposed to severe air travel disruptions in the wake of US-Israeli attacks on Iran on February 28.

"The conflict in the Middle East has created uncertainty for the industry," chief executive Tufan Erginbilgic said in a trading update ahead of the group annual general meeting on Thursday.

He added, however, that "we expect to fully mitigate the current financial impact of the disruption to our business."

Erginbilgic praised the "strong start to the year" across its aerospace, defence and power systems divisions.

The group maintained its 2026 targets for an underlying annual operating profit of between £4 billion ($5.4 billion) and £4.2 billion. 

"We remain strongly positioned to deliver our mid-term targets, with substantial growth beyond the mid-term from both our existing and new businesses," Erginbilgic said.

Rolls-Royce has undergone a major turnaround since Erginbilgic took the helm in 2023 leading to repeated upgrades to its outlook. 

Net profit more than doubled last year to £5.8 billion, buoyed by strong aircraft engine performance and a favourable currency effect linked to a weaker dollar.

Rolls-Royce had benefited also from cost savings, while the group is set to profit further from government spending on defence.

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France's economy recorded zero growth in the first quarter of this year due to "sluggish" domestic demand and a "strongly" negative contribution from foreign trade, the national statistics agency INSEE said Thursday.

The first estimation of first quarter gross domestic product (GDP) shows the impact of the war in the Middle East, which began on February 28. 

As little as two weeks ago, the French central bank estimated that the country's economy could grow by as much as 0.3 percent in January through March, while INSEE had cut its forecast from 0.3 percent to 0.2 percent growth at the end of March.

France's economy had expanded by 0.2 percent in the final quarter of 2025.

Final domestic demand is "sluggish", said INSEE, with households spending declining "slightly", making a -0.1 percentage point contribution to growth in the first quarter after having provided a 0.4 percent boost in the final quarter of 2025.

Foreign trade made a "strongly" negative 0.7 percentage point contribution to growth in the quarter, with exports falling "sharply", according to INSEE.

In mid-April, France slightly lowered its full-year GDP forecast to 0.9 percent, down from a previous 1.0 percent over the economic situation linked to war in the Middle East. 

"A very moderate impact is expected on growth," Finance Minister Roland Lescure said at the time.

He also said he expected inflation to remain limited "despite the energy shocks and sharp rise in oil prices".

But INSEE on Thursday said that consumer prices rose by 2.2 percent year-on-year in April following a 1.7 percent increase in March.

This increase was driven by a sharp rise in energy prices, which surged by 14.2 percent year-on-year in April after a 7.4 percent increase in March, as the war in the Middle East sent global oil prices soaring.

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Global automaker Stellantis -- owner of the Jeep and Fiat brands -- said Thursday it had swung back into profit in the first quarter on rising sales as it fixed manufacturing and operational problems.

The 14-brand group which also include Peugeot and Chrysler posted a net profit of 377 million euros ($440 million) in January through March, compared to a loss of 387 million euros in the same period last year.

Sales rose by six percent to 38.1 billion euros, with sales volumes rising in all regions, including North America, where the carmaker has suffered in recent years.

The sales revenue figure was slightly below analyst expectations compiled by financial data provider Factset, but the 12 percent increase in sales volumes surpassed forecasts.

"The first three months of 2026 reflect the early results of our actions to return Stellantis to sustainable, profitable growth," chief executive Antonio Filosa said in a statement.

Filosa said the new vehicles it launched last year had been well received and that Stellantis hopes that it can build on that momentum with another 10 models hitting showrooms this year.

"Our priority is clear: to put our customers back at the center of everything we do," he said.

Stellantis, formed in 2021 through a merger of France's PSA Group and Italian-American company Fiat-Chrysler, booked a colossal 20-billion-euro charge on its 2025 results as it sought to pivot away from the EV sector.

The company plans to unveil a new strategy on May 21 to sustainably turn around its fortunes as Western automakers face rising competition from Chinese carmakers.

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Denmark's Soren Torpegaard Lund, one of the favourites in the upcoming Eurovision Song Contest, has sparked a homophobic backlash in his progressive country with his electro-pop track, but he's just trying to "stay true to myself", he told AFP in an interview. 

Torpegaard Lund, 27, will compete in Vienna on May 16th with the song "For vi gar hjem" ("Before We Go Home"), an ode to the world of nightclubs.

It "tells the story of growing up with love and temptation, and actually giving in to it, because that's what we learn from, and that's how we learn to be grown-up human beings," he told AFP on a sunny afternoon in Copenhagen.

Torpegaard Lund says one of his greatest memories is Austrian drag artist Conchita Wurst's Eurovision victory in 2014, when he was 15 years old. 

"It made a big impact on me, just growing up as a queer kid," he said, "finding out what my identity was and just putting it out there."

"That was a very cool moment."

Now, he'll not only meet Wurst -- who is one of the show's presenters in Vienna -- but will also fulfil his boyhood dream of being on the Eurovision stage.

"I'm trying to really play it cool, but it is crazy to me that I'm going to be part of this."

- Backlash -

His hip-swinging number in tight leather pants and a mesh top has however raised some eyebrows in normally liberal Denmark.

"Some people in Denmark tried to tone my act down, and I also got some homophobic backlash from Danish people," he said.

"Fag in fishnets", "homo in a box" and "HIV spreader" were among the hurtful comments he received on social media, he said. 

"I'm definitely going to channel just staying true to myself," he said.

"I hate to see that it's still happening," he sighed, referring to anti-gay attacks.

"I also loved being able to reply ... just being like, 'you can't touch me'."

"We can be here. You can be here. Everyone can be here at the same time," he said.

Originally from a small town in central Denmark, Torpegaard Lund never took to sports, setting him apart from other kids.

Instead, he turned very early to musical theatre, piano, and singing.

"There was nothing else for me that I could do so I kind of just went on that path," he said.

He attended Denmark's National School of Performing Arts, and has since played the lead role of Tony in a Danish production of West Side Story, among other things.

In February, Danes selected his song for Eurovision, with leading daily Politiken calling it "the right choice".

He is "an artist who is comfortable on stage, extroverted, with a choreography already ready that could easily fit into the Eurovision Song Contest," the newspaper wrote.

- 'Create hope' -

Another challenge for Torpegaard Lund will be to rekindle Denmark's interest in Eurovision, where it has lost some of its lustre after wins in 1963, 2000 and 2013.

"I didn't know that it was kind of cringe," he said.

"It was very, very big in the 1980s and 1990s in Denmark and then it kind of stumbled the last 10 years."

"But I feel like it's definitely having its comeback, and the music industry is realising that it's very cool for established artists to have a platform to show their music."

While focused on his performance, he's also aware of the tensions around this year's competition.

Five European broadcasters, including Ireland and Spain, are expected to boycott the 2026 edition over Israel's participation, and more than 1,000 artists have also urged a boycott. 

For the Dane, the priority is for people to pull together.

"In times of crisis, we as human beings have always come together to try to create hope in different ways, and ... celebrate some kind of hope together. And I'm proud of being part of that."

His act of rebellion? 

He has refused to translate his song into English, as is customary for smaller languages like Danish, and is proud to represent all of Denmark -- including Greenland and the Faroe Islands -- at a time when US President Donald Trump's appetite for Greenland threatens its territorial integrity.

"I'm proud of representing countries that need to fight for their own right, their own freedom."

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