FRANKFURT: European shares dropped on Wednesday to their lowest in more than a month after crude prices surged above the key USD100 a barrel mark as escalating Middle East tensions heightened inflation concerns and dampened risk appetite.
The pan-European STOXX 600 was down 1.4 percent at 640.41points, hitting the lowest since late July. Most of the regional bourses also traded sharply lower.
Finland’s blue chips were a bright spot, firming 0.8 percent to hit their highest in nearly three months.
Fortum led gains on the STOXX 600, climbing 15.8 percent after the Finnish energy group signed a long-term power purchase agreement with Google. The tech giant said it would invest at least €13 billion (USD15.1 billion) in AI infrastructure in Finland over the two years.
Brent futures topped USD100 a barrel for the first time since late July after Iran and the US struck tankers in the biggest wave of shipping attacks since the war began, raising the prospect of further disruptions to Middle East energy supplies.
Energy was the only sector in positive territory, up 0.3 percent, while all other major sectors declined. The Euro STOXX volatility index rose 2.17 points to its highest level in a week.
“Higher oil prices mean higher inflation expectations, which also means higher chances of interest rate hikes and the higher bond yields,” said Kiran Ganesh, managing director, global head of investment communications at UBS.
“So oil is the key driver, and it’s having a compounding negative impact on equities over the past few days.”
With volatility rising, investors appeared reluctant to add risk ahead of a packed run of central-bank decisions and economic data that could shape expectations for growth and borrowing costs.
Euro zone government bond yields reached fresh multi-year highs on the day before the European Central Bank meeting as traders priced in two hikes in 2026 and a 3.1 percent rate by late 2027.
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