European Stocks Decline as Investors Monitor Middle East Risk
European stocks retreated as investors assessed how Iran would potentially respond to unprecedented US air strikes.
The Stoxx Europe 600 Index fell 0.3% by the close. Chemicals and banking stocks underperformed, while utilities and technology gained.
Israel ratcheted up attacks on Iran while Tehran vowed to retaliate against US strikes on its nuclear facilities, fueling fears of a wider war in the Middle East. Oil has risen more than 10% since the onset of the conflict amid concern Iran may interrupt tanker traffic through the Strait of Hormuz.
“The key will be whether Iran tries and achieves closing the Strait of Hormuz,” said Roberto Scholtes, head of strategy at Singular Bank. A fifth of the world’s oil supply flows through the critical waterway each day, with Scholtes adding that energy prices would soar if it were to be shut.
A rebound in European stocks has stalled this month as the Middle East conflict dampened risk appetite. Inflation concerns have also returned with the jump in oil prices. While there hasn’t been a broad-based selloff in equity markets, hedging demand has increased as investors planned for all scenarios. Bearish put trading soared last week, heavily exceeding demand for calls in Europe.
Source : Bloomberg
