European stock markets erased gains and turned lower as an attack on energy facilities in Iran pushed oil prices higher, sparking inflation concerns. Traders are now betting on two interest rate hikes from the European Central Bank this year.
The Stoxx Europe 600 index fell 0.8%, having earlier advanced as much as 0.7%. The price of Brent crude oil climbed to $109 per barrel after Iran stated that the US and Israel attacked the massive South Pars gas field. In response, Iran identified energy assets in Saudi Arabia, Qatar, and the UAE as potential targets for retaliation.
Data showed US wholesale inflation unexpectedly accelerated month-on-month in February, reflecting rising costs for goods and services. Markets are closely monitoring price pressures ahead of interest rate decisions from the Federal Reserve later on Wednesday and the European Central Bank on Thursday.
European equities are facing their worst month in over three years. Soaring energy prices have fueled concerns about heightened inflation and slowing economic growth, leading to declines in stock markets.
"Equity markets remain highly sensitive to the situation in the Middle East," said Wolf von Rotberg, equity strategist at Bank J. Safra Sarasin. "As long as the conflict persists and oil prices remain around current levels, a sustained recovery in equities is unlikely."
In individual stock movements, Bolloré rose 11% after the French conglomerate announced a special dividend. Diploma Plc reached a record high after the building components supplier raised its full-year organic revenue forecast.
Conversely, HelloFresh SE fell 15% as the meal-kit delivery company projected sales would decline for a second consecutive year. Swatch Group dropped 4.5%, with the Swiss watchmaker facing impacts from tariffs and trade disruptions.
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