European Stocks Fall as Gulf Tensions and Oil Surge Weigh on Markets

Frankfurt / London / Brussels | EcoPulse24

European stock markets closed lower for a second consecutive session on Thursday as escalating geopolitical tensions in the Middle East and rising energy prices fueled investor concerns about inflation and economic growth across the region.

The Euro Stoxx 50 declined 0.9% to close at 5,744, while the broader Stoxx Europe 600 slipped 0.7% to 599, as most sectors came under pressure amid rising government bond yields and growing fears that higher energy costs could squeeze corporate margins.

In Germany, the DAX 40 extended its losses, falling 0.2% to 23,590, as investors reacted to intensifying geopolitical risks following strong rhetoric from Iran regarding the Strait of Hormuz, a key global oil transit route.

Banking stocks were among the biggest losers in Frankfurt. Deutsche Bank dropped 5.4% after its annual report highlighted €26 billion in private credit exposure and potential $1 billion litigation risks. Commerzbank also declined 3.9%.

However, some companies posted notable gains. Zalando surged more than 10% after announcing a €300 million share buyback program, while Hannover Re rose 4.9% on higher dividend payouts. Energy group RWE gained 4.3% after reporting strong 2025 results and outlining an ambitious expansion strategy.

In London, the FTSE 100 fell 0.5% to close at 10,305, weighed down by rising oil prices and inflation concerns tied to escalating tensions in the Middle East.

Financial stocks led the decline, with HSBC dropping 6.1% after trading ex-dividend and amid concerns about its exposure to Middle Eastern markets. Shares of Barclays, Standard Chartered, Lloyds, and NatWest also fell between 2% and 5%.

Interest rate-sensitive housebuilders such as Persimmon, Barratt, and Redrow declined, while airline stocks including EasyJet and IAG slipped due to rising fuel costs.

On the upside, Rentokil Initial jumped 5.2% following a UBS upgrade. Defense group BAE Systems rose 3.1%, while energy majors BP and Shell advanced as higher crude prices boosted the sector.

EcoPulse24 Analysis

European equities are facing mounting pressure from a combination of geopolitical risks and macroeconomic uncertainty. Rising oil prices threaten to intensify inflationary pressures across the Eurozone, while higher bond yields and expectations of tighter monetary policy from the European Central Bank are weighing on equity valuations. If tensions in the Middle East persist and energy supply disruptions continue, volatility across European markets could remain elevated in the near term.