European Stocks Drop Sharply

European stocks closed sharply lower on Wednesday, tracking a global equity downturn after Iran and the US exchanged new strikes and raised inflationary risks for the Eurozone. The Euro STOXX 50 fell 2.0% to 6,190 and the STOXX Europe 600 fell 1.8% to 634. The US moved to block Iran oil sales after the war was reignited and President Trump invalidated the current ceasefire. The resulting surge in fuel prices raised sovereign yields to reflect expectations that the ECB is likely to deliver more rate hikes this year. Santander and Deutsche Bank sank more than 5%. Also, UniCredit dropped 2.9% after it increased its stake Commerzbank, increasing the likelihood of a full takeover in the upcoming quarters. Meanwhile, the AI trade continued to be unwound as software companies came under new pressure, with SAP sliding 4%.

European stocks extended their losses on Wednesday, with both the STOXX 50 and the STOXX 600 falling nearly 2% amid escalating geopolitical tensions. Oil prices surged for a second straight session after US President Trump declared that, "as far as I'm concerned, the ceasefire is over". The US also launched fresh strikes on Iran and revoked a waiver that had allowed the country to sell crude on global markets, fueling concerns over further supply disruptions. Meanwhile, President Trump criticized Spain for failing to meet NATO defense spending commitments, calling the country "a terrible partner" within the alliance. Most sectors traded in negative territory, with healthcare, banking, and financial services among the worst performer while energy stocks bucked the broader market decline. HSBC (-1.9%), Roche (-1.6%), AstraZeneca (-1.2%), LVMH (-2.5%), Hermes (-3.6%), Banco Santander (-4.3%) were in negative territory while Repsol (3.8%), BP (3.1%) and Eni (3.2%) outperformed.

European stocks traded lower on Wednesday, with the STOXX 50 and STOXX 600 both falling 0.7%, as renewed tensions in the Middle East weighed on investor sentiment. The US launched fresh strikes against Iran and revoked a waiver that had allowed new purchases of Iranian oil, pushing oil prices higher and raising concerns over the inflation and interest rate outlook. As a result, markets increased their expectations for ECB tightening, with implied rate hikes rising to around 32 basis points from 25 basis points the previous day. Most sectors traded in negative territory. Among the biggest companies, AstraZeneca (-1.1%), Nestle (-0.8%), Hermes (-1.8%), SAP (-2.0%), and Banco Santander (-2.0%) were in the red. Energy stocks, however, outperformed on the back of stronger crude prices, with Shell (+0.7%), TotalEnergies (+1.6%), and BP (+1.8%) posting gains.