European stocks closed sharply lower on Wednesday as the continuing surge in energy prices reinforced fears that inflation could erode demand and force the ECB into multiple rate hikes this year. The Euro STOXX 50 dropped 1.7% to 6,304, while the STOXX Europe 600 declined 1.5% to 640.
Escalating strikes between the US and Iran midweek further delayed expectations for any normalization of fuel exports through the Middle East. Brent crude climbed above $100 per barrel, and regional natural gas benchmarks rose to their highest levels since 2022.
The ECB is expected to raise interest rates by 25 bps tomorrow and may signal whether it anticipates further tightening ahead. Rate-sensitive sectors were hit particularly hard, with Santander, ING, Deutsche Bank, and Allianz all losing about 2% amid concerns over weakening credit demand. Industrials also retreated, with Schneider Electric, Siemens, Rheinmetall, and Safran each falling more than 3%.
