European stock markets opened the week under renewed pressure on Monday, sliding sharply as a “surge in oil prices” triggered by the ongoing Middle East conflict intensified concerns over inflation and economic growth prospects.
The pan‑European STOXX 600 index tumbled to its lowest level in over two months, extending last week’s sell‑off and underscoring deepening market unease. The pan‑European STOXX 600 index tumbled to its lowest level in over two months. The benchmark recorded, according to Reuters, “its worst weekly performance in nearly a year”, driven largely by energy price volatility and geopolitical uncertainty.
Major national indices also reflected the downtrend. Germany’s DAX and France’s CAC 40 both shed significant ground, and the FTSE 100 in London declined, as investors reassessed risk in an environment of elevated commodity prices.
Crude oil surged more than 25% in recent sessions, with prices just shy of $120 a barrel, as fears of supply disruptions around the vital Strait of Hormuz gripped global markets. European reliance on imported energy has made the region especially sensitive to swings in oil and gas markets, reviving “inflation worries” at a time when core price pressures were already a policy focus for central banks.
The conflict between U.S.‑aligned forces and Iran shows no sign of abating, with Tehran’s leadership reaffirmed under newly appointed Mojtaba Khamenei, a signal to markets that hardliners retain control in the capital.
Sector performance was mixed but broadly negative outside energy. Financial and technology stocks extended losses as risk sentiment deteriorated, while national carriers such as Lufthansa and Air France‑KLM were among the worst hit given their exposure to fuel costs. Energy and defence stocks offered relative resilience, benefitting from the rally in crude prices.
Market positioning also reflected expectations about monetary policy. With headline inflation potentially elevated further by higher fuel costs, traders are now pricing the possibility that central banks, including the European Central Bank, may be reluctant to ease monetary conditions this year.
The bond market has not provided a haven from the turmoil. Euro‑zone government bonds sold off as yields climbed to year‑high levels, a reflection of “fears of a supply shock” and renewed inflation expectations that could complicate the policy outlook.
Given the unpredictable trajectory of the conflict, investors are adjusting strategies based on Middle East developments and potential international initiatives aimed at “ensuring supply continuity” and “limiting market disruption.”
