Europe's Stocks Tank Amid Crude Price Surge and ECB Hike Fears
European stock markets fell sharply on Wednesday as surging crude prices and an impending European Central Bank interest rate hike triggered a broad market retreat. The pan-European STOXX index dropped 1.4% to its lowest level since July 24, while Germany's DAX slid 1.4% to its lowest point since July 31.
The surge in crude prices was driven by a series of coordinated strikes on Tuesday by Iranian-backed Houthis in Yemen targeting several Saudi Arabian cities. This followed direct U.S. strikes against multiple Iranian oil tankers, which were met by an Iranian missile strike on a U.S. military base in Jordan.
Brent crude futures climbed 2.7% to $100.6 a barrel, crossing the $100 level for the first time since July. The prospect of crude breaking back above $100 per barrel delivers a potent psychological blow to global financial markets, which have spent much of the year agonizing over persistent inflation risks.
Energy majors such as TotalEnergies, Eni, Neste, and Galp Energia rose between 1.2% and 1.9%, while equities in other sectors fell. The expectation of elevated borrowing costs kept core European sovereign bond yields hovering near multi-year high watermarks.