European Shares Hit Four-Month Low Amid Rising Crude Prices

European shares plummeted to a four-month low primarily due to escalating crude prices, driven by the Middle Eastern conflict, prompting expectations of interest rate hikes by the European Central Bank. Trade-sensitive sectors like airlines and real estate were particularly affected, showcasing broader economic concerns in the region.

European shares hit a four-month low on Monday, poised for correction due to a surge in crude prices. The price increase has led to speculation of upcoming interest rate hikes by the European Central Bank amid growing tensions in the Middle East. The pan-European STOXX 600 fell 2.2%, ending the day at 561.11 points after facing three consecutive weeks of losses.

This decline marks an 11% drop from February's record closing high, a downturn comparable to the April 2025 U.S. tariff concerns. The market volatility index rose four points, reaching a two-week high of 35.8. Spain and Italy bore the brunt of these losses, with financial stocks most affected due to their sensitivity to economic projections.

Iran's threat to target Israeli power installations escalated the situation, pushing crude prices over $100 per barrel. Consequently, energy price-sensitive airlines like Air France and Lufthansa suffered significant declines. Despite the downturn, UBS's chief investment officer Mark Haefele advises investors to remain invested. Rate hikes by the ECB are now highly anticipated, as inflation concerns grow due to potential disruptions in oil imports through the Strait of Hormuz.