European shares drop amid Middle East war
The pan-European benchmark STOXX 600 ended 0.6% lower, with most regional bourses also in negative territory
European shares dropped on Wednesday as investors weighed the economic fallout of the Middle East war as it entered its twelfth day.
The pan-European benchmark STOXX 600 ended 0.6% lower, with most regional bourses also in negative territory.
Germany’s DAX dropped the most, shedding 1.4%, dragged lower by an 8% drop in Rheinmetall after the defence firm’s outlook for profit margin and free cash flow in 2026 fell short of some analyst forecasts.
The decline also pulled the broader defence sector down 1.8%, while the industrial sector shed 1.2%.
Iran said the world should be prepared for oil to hit $200 a barrel, as three more ships came under attack in the blockaded Gulf, while Iran continued its attacks on Israel and targets across the region.
The International Energy Agency (IEA) agreed to release 400 million barrels of oil, the largest such move in its history, to try to restrain soaring crude prices, which continued to rise. Energy stocks were the biggest gainers on the STOXX 600, up 1.6%.
Even where actions can provide near-term relief, the dominant driver for sustained (oil) price normalization remains confidence in safe passage and the operational ability for tankers to resume regular transit, said Laura Cooper, global investment strategist and head of macro credit at Nuveen.
Policy steps may not be sufficient if physical flows aren’t credibly restored, she added.
The war has disrupted key shipping routes through the Strait of Hormuz, which carries one-fifth of the global oil trade, lifting oil prices and raising the risk of a price shock. The STOXX 600 has declined 5% from its late February record high.
European Central Bank policymakers acknowledged the economic risk from surging oil prices and promised swift action if they thought higher inflation was at risk of getting entrenched.
Money markets are pricing in an interest rate hike this year, compared to a slight cut before the war began, per LSEG-compiled data.
Barclays warned the STOXX 600 could drop to around 550 points if oil prices stay near $100 a barrel.