European Stocks Set for Lower Open

European stocks traded lower on Thursday, with the STOXX 50 falling 1.2% and the STOXX 600 declining 0.9%, extending losses from the previous session and falling to their lowest levels since mid-June, as a surge in oil prices weighed on risk sentiment amid escalating tensions in the Middle East. Oil prices climbed following reports that the White House had asked the Pentagon to draw up strike options against Iran that could be executed before the midterm elections.The rise in oil prices pushed bond yields higher again, adding further pressure on equities. Basic resources led the declines, while banks and healthcare stocks also came under pressure. In contrast, oil and gas shares traded higher. Among the largest companies, ASML (-1.6%), HSBC (-2%), Novartis (-1.1%), LVMH (-1%), Siemens (-1.9%) and L'Oreal (-1%) were all lower while Shell (1.1%) and TotalEnergies (1.1%) booked gains.

European equity markets were expected to open lower on Thursday, extending the previous session’s declines as oil prices climbed amid fears of a potential escalation between the US and Iran and continued threats to oil flows from the Middle East, stoking inflation concerns. The latest FOMC minutes also pointed to a hawkish stance among policymakers amid elevated inflation risks. In Europe, investors will focus on German trade and new car registration data, along with the latest ECB Monetary Policy Meeting Accounts. On the corporate side, UK retailer Tesco is scheduled to report earnings. In premarket trading, Euro Stoxx 50 and Stoxx 600 futures were down 0.2% and 0.3%, respectively.

European stocks closed sharply lower on Wednesday as energy prices rebounded and bond yields surged, hampering corporate earnings projections. The Euro STOXX 50 fell 1.6% to 6,175 and the STOXX Europe 600 lost 1.1% to 630. Benchmark 10-year yields in Italy jumped 10 bps and those in France surged 15 bps, despite a flat session for the German Bund, reinforcing concerns over fragmentation across eurozone sovereign bond markets. Fears of contagion weighed heavily on lenders. Deutsche Bank shares dropped 5%, while Intesa Sanpaolo, UniCredit, and BNP Paribas fell 4% each. Industrial giants also lost ground, with Siemens and Safran sliding 3% each, while Schneider dropped 2.3% to extend yesterday's slump as markets continued to assess the company's acquisition of PTC.