European Stocks Plunge Ahead of ECB and BoE Decisions

European shares tumbled on Thursday, dragged down by escalating Middle East tensions that pushed energy prices higher and dampened risk appetite ahead of key ECB and Bank of England rate decisions. The STOXX 50 dropped 2% to 5,620, its lowest level since late November, while the broader STOXX 600 fell 2% to a three-month low of 586, led by declines in industrials and miners as gold retreated. Heavy losses in major financial stocks added further pressure. While both the ECB and BoE are expected to hold rates steady, a fresh surge in European gas and Brent crude prices, amid deepening Iran-related tensions, has heightened economic risks, prompting markets to price in more rate hikes this year. Among standout movers, Logitech rose 2% after unveiling a $1.4 billion share buyback program.

European equity markets were set to open sharply lower on Thursday as fresh attacks on energy infrastructure in the Middle East and a hawkish hold from the US Federal Reserve weighed on investor sentiment. The Fed kept its policy rate unchanged as widely expected while warning of upside inflation risks stemming from the Iran war. The European Central Bank and the Bank of England are also expected to leave rates unchanged later today as policymakers assess the fallout from the Middle East conflict. UK employment data will also be closely watched for fresh signals on labor market conditions. Meanwhile, Brent futures surged above $112 a barrel after Iran launched missile strikes on a Qatari facility housing the world’s largest LNG export plant, one of several energy assets Tehran pledged to target following an Israeli strike on Iran’s South Pars gas field. In premarket trading, Euro Stoxx 50 and Stoxx 600 futures were down 1.7% and 1.5%, respectively.

European stocks closed firmly lower on Wednesday, pressured by another session of higher energy costs as markets await major central bank decisions in the incoming session. The Eurozone's STOXX 50 dropped 0.5% to 5,744 and the pan-European STOXX 600 fell 0.7% to 598. Tech shares led the losses after outperforming their peers at the start of the week, with SAP and Prosus losing 2.5% and 7.4%, respectively. Meanwhile, another jump in natural gas prices pressured utilities with Enel dropping more than 3%. In turn, UniCredit underperformed other banks as markets await news on Commerzbank's shareholders' call for the former's $40 billion acquisition offer. The Federal Reserve is expected to hold its rates unchanged overnight but the FOMC will update its economic projections. Meanwhile, the ECB, BoE, SNB, and Sveriges Riksbank are all expected to hold rates unchanged during tomorrow's session.