Banks Drag European Stocks to Three-Month Lows Amid Inflation Concerns

European stocks declined to three-month lows on Tuesday due to banks leading losses and concerns over oil-driven inflation. The pan-European STOXX 600 fell 0.8% to 630.99 points by 0840 GMT, its lowest since June 12.

Banks and financial services were among the biggest drags, down 1.3% and 2.7%, respectively. UBS fell 4.2%, Deutsche Bank dipped 1.2%, UniCredit dropped 2.3%, and Standard Chartered slipped 2.1%. Ipek Ozkardeskaya, senior analyst at Swissquote Bank, attributed the decline to Bank of America CEO Brian Moynihan's warning that the U.S. lender's investment banking fees could drop by at least 10% in the third quarter.

Rising bond yields and surging oil prices further weighed on risk appetite. The benchmark U.S. 10-year Treasury yield breached 5% on Monday, its highest levels in nearly two decades. Oil prices rose over 3%, reinforcing inflation concerns and prompting markets to price in rate hikes.