European Stocks Plummet as Banks Drag Down Index

European shares have taken a hit, plummeting to three-month lows on Tuesday. The pan-European STOXX 600 index dropped by 0.8% to 630.99 points at 0840 GMT, its lowest since June 12.

Banks were among the biggest decliners, with Credit Suisse falling by a staggering 4.2%. UniCredit and UBS also took a hit, dropping by 2.3% and 2.1%, respectively. This decline was largely attributed to warnings from Bank of America's CEO Brian Moynihan that investment banking fees could drop by at least 10% in the third quarter.

Rising bond yields are further exacerbating the situation, with the benchmark 10-year bond breaching 5% on Monday and reaching its highest levels in nearly two decades. The surge in oil prices, which rose over 3% on Tuesday, is also fueling inflation concerns and prompting markets to price in rate hikes.

Markets are now eagerly awaiting the U.S. Federal Reserve's interest rate decision this week, with traders pricing in an over 90% chance of a rate hike. The European Central Bank raised interest rates for the second time last week, further contributing to the current market volatility.