European Stocks Slump to Three-Month Lows Amid Oil Price Spike

European stock markets fell to three-month lows on Tuesday due to rising oil prices and bond yields, dampening investors' risk appetite ahead of the US Federal Reserve's rate decision. The pan-European STOXX 600 index dropped 0.3% to 634.18 points, its lowest closing level since June 12.

Banks and financial services stocks were among the biggest drags, falling 0.9% and 1.9%, respectively. UBS dropped 3.4%, making it one of the top decliners on the STOXX 600. The sector came under pressure after Bank of America CEO Brian Moynihan warned that its investment banking fees could drop by at least 10% in the third quarter.

Higher borrowing costs added to the cautious mood, with the benchmark US 10-year Treasury yield breaching 5% on Monday for the first time in nearly two decades. The European Central Bank raised rates for the second time this year last week, and investors are now focused on the Fed's decision on Wednesday.

LVMH shares fell 2.6%, while the broader European luxury gauge slid 1.5%. L'Oreal overtook Louis Vuitton owner LVMH to become France's most valuable listed company, marking the first time since 2017 that a non-luxury company has held the top spot on the Paris market.