Source: Sharecast
The pan-European Stoxx 600 fell 0.67% to 594.69.
Germany’s DAX dropped 0.83% to 23,394.38, while France’s CAC 40 slid 0.98% to 7,915.36.
London’s FTSE 100 declined 0.34% to 10,249.52.
Patrick Munnelly, market strategy partner at TickMill, said the sell-off reflected rising concerns about the inflationary impact of surging energy prices, noting that “on Monday, UK stocks plunged to their lowest levels in nearly two months as surging oil prices stoked inflation fears and raised concerns about potential interest rate hikes.”
Energy markets remained the central focus for investors.
Brent crude was last up 7.27% on ICE at $99.43 a barrel, after briefly spiking as high as $119, marking the first time prices have breached the $100 mark since Russia’s invasion of Ukraine in February 2022.
US benchmark West Texas Intermediate was ahead 4.22% at $94.74 a barrel.
Chris Beauchamp, chief market analyst at IG, said the surge underscored the fragile outlook for energy supplies.
“The overnight panic in oil has eased for now as the price reverses its madcap gains above $100, but the underlying reasons for the shock move remain in place,” he said.
“It is now open season on oil infrastructure across the region, which puts a near-term floor under the price well above the pre-war highs.”
Oil prices surged as Iran continued launching missiles at neighbouring Gulf states and shipments through the Strait of Hormuz ground to a halt, blocking roughly 20 million barrels of crude a day from reaching global markets.
G7 ministers were set to meet to discuss a potential release of emergency crude reserves in an attempt to ease the supply crisis.
Beauchamp warned that supply interventions may offer only limited relief. “Iran might be into the predictions game with warnings of $150 and $200 oil, but even a co-ordinated release of reserves is unlikely to halt the rise unless a ceasefire appears soon,” he said.
Hopes that Tehran might negotiate an end to the conflict faded after Mojtaba Khamenei, the second son of assassinated supreme leader Ayatollah Ali Khamenei, was named as his successor, reinforcing expectations that tensions could escalate further.
Munnelly said the leadership shift signalled that hardline positions were likely to persist, noting that “Iran’s decision to appoint Mojtaba Khamenei as the successor to his father, Ali Khamenei, as supreme leader signals the continued dominance of hardliners in Tehran.”
Eurozone investor sentiment weakens, German factory orders decline
Economic data added to the cautious mood.
Investor sentiment across the eurozone weakened for the first time in four months in March, according to a survey by Sentix, as the conflict in the Middle East dented economic confidence.
The Sentix Economic Index for the single currency area fell 7.3 points to -3.1.
The research group said the deterioration “casts considerable doubt on the recent upturn in the EU,” adding that “globally, too, the outlook is bleak,” with all regions feeling the strain in both current conditions and economic expectations.
The Global Aggregate economic index fell 5.5 points to +9.7, while global expectations dropped to their lowest level since September.
In Germany, factory orders recorded their steepest decline in two years in January, while industrial production fell for a second consecutive month.
Price-adjusted new manufacturing orders dropped 11.1% following a 6.4% rise in December, according to data from the Federal Statistical Office Destatis, marking the sharpest fall since January 2024 and the first monthly contraction since August.
Destatis said the decline reflected a return to normal levels after an unusually high volume of large-scale orders in December.
Orders for fabricated metal products plunged 39.4% after rising 29.7% the previous month, while automotive orders rose 10.4% and transport equipment orders increased 9.2%.
Excluding large-scale orders, new factory orders would have fallen by just 0.4%.
Meanwhile, industrial production slipped 0.5% in January after a revised 1.0% decline in December, with output of fabricated metal products falling 12.4%, pharmaceutical products dropping 11.9%, and computer, electronic and optical products down 6.8%.
Energy stocks rally as airlines descend
In equities, energy stocks were among the few gainers as surging crude prices boosted the sector.
Shares in Shell rose 1.85%, BP climbed 1.24%, Galp gained 1.93% and Equinor added 0.74%.
Airlines, which are highly sensitive to fuel costs, were sharply lower.
British Airways and Iberia owner IAG fell 4.43%, Deutsche Lufthansa dropped 6.38%, Air France-KLM declined 3.87%, while easyJet fell 3.5%, Ryanair lost 2.56% and Wizz Air dropped 7.17%.
Beauchamp said equities may remain under pressure even if oil volatility subsides.
“Stocks have recouped their overnight losses, but while oil is full of sound and fury, the decline in equities is likely to be more of a slow burn,” he said.
“The jump in oil prices means that there is even less reason to hold onto expensive stocks for the time being, particularly when the inflationary outlook is poised to take a material turn for the worse.”
Reporting by Josh White for Sharecast.com.