Oil Prices Spike Sends European Shares Plummeting

European shares plummeted to three-month lows on Tuesday as oil prices surged and investors became increasingly cautious ahead of the US Federal Reserve's rate decision. The pan-European STOXX 600 index fell by 0.3% to 634.18 points, its lowest closing level since June 12.

Banks and financial services stocks were among the biggest drags, with UBS dropping 3.4%. This decline was triggered by warnings from Bank of America CEO Brian Moynihan that the US lender's investment banking fees could drop by at least 10% in the third quarter.

The rising oil prices and bond yields have created a pessimistic market environment, prompting investors to price in further rate hikes from major central banks. 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, with over a 90% chance of a rate hike.