ECB Rate Hike Looms as Oil Prices Surge Past $100

European equities rebounded slightly on Thursday after plummeting to a one-month low in the previous session.

The pan-European STOXX 600 index rose by 0.1%, recovering from a 1.4% drop on Wednesday, which left it at its lowest level since late July.

Investors are bracing for a high-stakes interest rate decision from the European Central Bank later in the day, with money markets now pricing in a 25-basis-point increase to take the benchmark deposit rate to 2.50%.

The sudden shift in market expectations comes after a rapid sequence of macroeconomic and geopolitical shocks, including direct military clashes in the Middle East, which sent crude oil soaring past $100 a barrel and reignited fears of stagflation.