European equities tumbled on Tuesday, deepening the sharp selloff from the previous session as fears that the war in Iran could trigger an energy supply shock darkened the region’s growth outlook. The Eurozone benchmark index dropped 3.5% to 5,776, while the pan-European STOXX 600 slid 3.2% to 604.
Iranian forces continued to strike energy infrastructure in Gulf Cooperation Council (GCC) states and issued formal threats against vessels transiting the Strait of Hormuz on the conflict’s fourth day. The escalation sent European natural gas benchmarks soaring, more than doubling since last Friday.
Banks led the declines as the prospect of higher inflation prompted traders to price in additional rate hikes, sparking a selloff in European sovereign bonds. Santander shed 6.2%, while BBVA and UniCredit each fell around 5%.
Energy-intensive industrial and chemical groups also came under heavy pressure. Siemens, Schneider Electric, and Bayer all lost more than 5%. Rate expectations shifted further to the hawkish side after Eurozone inflation for February surprised to the upside.
