European stocks ended sharply lower for a second consecutive session on Thursday, pressured by another steep selloff in government bonds and a renewed spike in energy prices that deepened concerns over stagflation and margin compression. The Eurozone’s STOXX 50 fell 0.9% to 5,744, while the pan-European STOXX 600 lost 0.7% to close at 599.
Geopolitical tensions escalated after Iran’s new Supreme Leader, Mojtaba Khamenei, said the country was prepared to close the Strait of Hormuz and adopted a defiant stance that mirrored increasingly combative US rhetoric. The remarks heightened fears that vital energy flows from the region could remain disrupted for an extended period.
Government bond yields surged on expectations that the European Central Bank will keep interest rates higher for longer, undermining banking stocks already grappling with pressure on net interest income. UniCredit and BNP Paribas each slipped close to 4%, while Deutsche Bank tumbled 5.3% after warning that it holds $30 billion in private credit exposure, an asset class facing rising redemption requests. Among industrial names, Safran and Airbus both declined more than 2%.
