European equity markets close sharply lower

The pan-European Stoxx 600 dropped 1.13% to 580.84, with Germany’s DAX down 1.5% at 22,612.97 and France’s CAC 40 slipping 0.98% to 7,769.31

European equity markets closed sharply lower on Thursday as escalating uncertainty around ceasefire talks in the Iran war weighed on sentiment, while a surge in oil prices added to inflation concerns.

As Dan Coatsworth, head of markets at AJ Bell, put it: Investors look like they’re fed up with the hot and cold messages around Iran peace talks.

The pan-European Stoxx 600 dropped 1.13% to 580.84, with Germany’s DAX down 1.5% at 22,612.97 and France’s CAC 40 slipping 0.98% to 7,769.31. London’s FTSE 100 declined 1.33% to 9,972.17.

Energy markets moved sharply higher, with Brent crude adding 6.12% to $108.48, reflecting concerns over prolonged disruption in the Middle East.

Brent crude added more than 5% to around $108 per barrel as renewed US pressure on Iran kept supply concerns elevated, particularly around the Strait of Hormuz, where disruptions may persist, said Axel Rudolph, chief technical analyst at IG.

Despite ongoing diplomatic efforts, Iran has rejected ‘unacceptable’ ceasefire proposals, while reports of potential shipping fees, he said.

Meanwhile, most global equities fell as investors weighed the inflationary impact of higher energy prices and the likelihood of a prolonged conflict, he added.

Coatsworth added: The fact the Vix fear index jumped 6% and oil prices rose by 5% would suggest recent market optimism about a resolution in the Middle East is fading fast. Stock markets fell around the world as investors expressed their frustration.

A gloomy economic outlook report from the OECD didn’t help matters, flagging the impact of the Middle East crisis on inflation, he added. Investors will have already been aware of the risk of costs going up but seeing it in black and white in the OECD report brought home the severity of the situation.