Europe close: Stocks slide amid oil price rally

12th Mar 2026 16:32

(Sharecast News) - European stocks fell on Thursday as surging oil prices and escalating tensions in the Middle East fuelled fresh inflation concerns and weighed on investor sentiment, with analysts warning that markets remain under pressure as the conflict intensifies.

The pan-European Stoxx 600 slipped 0.66% to 598.55.

Germany's DAX edged 0.29% lower to 23,572.44, while France's CAC 40 declined 0.71% to 7,984.44 and London's FTSE 100 dropped 0.47% to 10,305.15.

"It remains the case, so long as the US and Iran are at each other's throats, that equity markets will remain under pressure," said Chris Beauchamp, chief market analyst at IG.

"Oil prices are up by double-digit percentages again today, as the realisation sinks in that the US is not about to either end the war or institute some kind of convoy system in the region.

"Traders continue to take each bounce as an excuse to sell equities, and are buying oil on weakness."

Energy markets remained the central focus after crude prices briefly surged above $101 a barrel overnight amid intensifying attacks linked to Iran across the Gulf region.

Brent crude futures were last up 8.41% on ICE at $99.72 per barrel, while the NYMEX quote for West Texas Intermediate rose 9.34% to $95.40.

Patrick Munnelly, market strategy partner at TickMill, said the surge in energy prices had unsettled investors across global markets.

"Britain's leading stock indexes extended their downward trajectory on Thursday, driven by soaring oil prices that reignited inflation fears.

"The ongoing conflict in the Middle East further deepened market uncertainty, prompting traders to reassess the likelihood of the Bank of England cutting interest rates anytime soon."

The surge came despite efforts to stabilise markets after the International Energy Agency agreed on Wednesday to release an unprecedented 400 million barrels of crude from its 32 member countries.

No timeline was provided for when those emergency reserves would reach the market.

Hostilities continued to disrupt key energy infrastructure and shipping routes.

Two tankers were set ablaze in Iraqi waters early Thursday after senior Iranian officials warned of a prolonged "war of attrition" that could destabilise the global economy.

Oman's key oil export terminal at Salalah was evacuated and operations suspended following an Iranian drone strike late Wednesday that damaged several fuel tanks, according to the United Arab Emirates' foreign ministry.

Shipping traffic through the vital Strait of Hormuz - which carries around 20% of global crude supply - has nearly ground to a halt after multiple cargo vessels were struck in recent days.

On Wednesday alone, three ships were hit in the strait, while further attacks targeted a fuel facility in Bahrain and an Italian military base in Iraq.

The disruption also reduced output from major producers as storage facilities fill up and shipments stall, while analysts warned that blocked fertiliser shipments could drive up global food prices.

"Crude oil prices surged past the $100 per barrel threshold earlier in the session, following reports of an alleged attack by Iranian vessels on two fuel tankers in Iraqi waters," Munnelly said.

"Escalating tensions between Iran and US-Israeli forces show no signs of abating, adding further volatility to energy markets."

Iran's newly appointed supreme leader, Mojtaba Khamenei, said on Thursday that the Strait of Hormuz should remain closed to maintain pressure on Western countries.

In remarks carried by Iranian state media, he also warned that US bases across the Middle East should be shut and could become targets, adding that Iran would seek compensation from its enemies "or destroy their assets accordingly."

Warnings over energy price impact on German economy

Economic data released during the session highlighted the potential economic fallout from the surge in energy prices.

Germany's Ifo institute maintained its forecast for 0.8% growth this year but said the economy would have expanded by around 1% without the conflict.

It warned that prolonged high energy costs could slow growth to 0.6% this year and push inflation close to 3%.

The institute said it expected the economy to grow 1.2% in 2027.

Other research bodies also trimmed forecasts.

The IfW institute lowered its 2026 growth projection to 0.8%, while the RWI institute cut its outlook for this year to 0.9% and reduced its 2027 forecast to 1.2%.

"The Iran war demonstrates how vulnerable the German economy remains due to its energy dependencies," said RWI forecasting head Torsten Schmidt.

All three institutes expected inflation to rise to at least 2.5% this year before easing again in 2027.

In the UK, the housing market showed signs of weakening as geopolitical tensions dented confidence.

The latest residential market survey from the Royal Institution of Chartered Surveyors showed the house price balance falling to -12 in February from -10 in January, while the new buyer enquiries balance dropped to -26 from -15.

Agreed sales also declined to -12.

US economic data meanwhile offered mixed signals for global markets.

Initial jobless claims fell by 1,000 to 213,000 in the week ended 7 March, while continuing claims declined by 21,000 to 1.85 million.

Meanwhile, US building permits dropped 5.4% in January to 1.37 million, though housing starts rose 7.2% to 1.487 million, the highest level since February 2025.

Defence stocks in the green, Savills slides

Across corporate news, defence stocks advanced as investors anticipated stronger military spending.

Italy's Leonardo climbed 5.69% after reporting stronger-than-expected revenues of €19.5bn and net profit of €1bn for 2025, up 19% year on year, while forecasting revenues of around €21bn this year.

Thales gained 2.99%, Saab rose 3.3%, Hensoldt added 3.15% and Dassault Aviation advanced 1.22%.

Elsewhere, Swiss turbocharger maker Accelleron Industries surged 11.76% after results beat expectations, while French biotech Abivax jumped 6.75% on renewed takeover speculation after reports suggested AstraZeneca could be considering a bid.

German automaker BMW rose 1.06% after reporting 2025 net profit of more than €7bn, slightly above consensus estimates, though the company warned tariff-related pressures could trim its automotive EBIT margin by about 1.25 percentage points this year.

On the downside, Savills dropped 7.19% after announcing a $1.1bn acquisition of U.S. real estate investment bank Eastdil Secured despite reporting an 11% rise in 2025 profit before tax to £145m.

HSBC fell 5.93% after deciding to close its Qatar branches indefinitely amid rising security concerns in the region, a move Munnelly said had also unsettled investors.

"Meanwhile, HSBC saw its shares tumble ... after announcing the closure of all its branches in Qatar until further notice, citing the ongoing unrest in the region," he said.

Reporting by Josh White for Sharecast.com.