European Shares Dive Amid Rate Hike Fears

European shares hit two-month lows as the European Central Bank raised interest rates, signaling more hikes due to inflation from a war-driven energy shock. Major indices, including the pan-European STOXX 600, fell as miners saw large drops in value. ECB President Christine Lagarde highlighted inflation risks, but no firm commitments were made for future hikes.

European shares have plunged to their lowest levels in two months amid expectations of further interest rate hikes. The downturn came after the European Central Bank raised borrowing costs on Thursday and flagged higher inflation due to the ongoing conflict-driven energy shock.

The pan-European STOXX 600 index fell 0.7% to 635.97 points, driven lower by declines in major regional markets. The ECB increased interest rates by 25 basis points to 2.5% with concerns that soaring energy prices, exacerbated by the Iran war, could ripple through the euro zone economy, heavily reliant on fuel imports.

ECB President Christine Lagarde warned that inflationary risks are escalating, although no preset plans for future rate hikes were outlined. Meanwhile, European miners faced significant losses, plummeting 3.7%, amid falling copper prices and an uncertain tariff decision from the White House.