Global Market: European stocks subdued as oil surge fuels inflation, ECB rate hike bets

European shares were subdued on Monday as higher oil prices following fresh US-Iran attacks intensified inflation concerns and strengthened expectations that the European Central Bank could raise interest rates later this week, Reuters reported.

The pan-European STOXX 600 was down 0.1% at 649.17 points by 0711 GMT. The Swiss benchmark index underperformed, falling 1.2%, while Germany’s DAX was broadly flat.

Oil prices lift energy stocks


Energy stocks gained 1.2% as oil prices climbed amid growing concerns over supply disruptions. Brent crude futures rose by more than $1 a barrel after tit-for-tat strikes between the United States and Iran involving vessels in the Strait of Hormuz and other areas heightened fears of a prolonged disruption to oil supplies.

According to Reuters, the rise in energy prices has renewed concerns about inflation, potentially increasing pressure on central banks to maintain or tighten monetary policy.

ECB rate decision in focus

The ECB is widely expected to raise interest rates by 25 basis points on Thursday, with investors closely watching the central bank’s guidance on the outlook for further policy tightening.

Reuters reported that stronger oil prices have added to inflation risks at a time when policymakers are assessing the impact of geopolitical tensions on the euro zone economy.

Markets are also awaiting US consumer price inflation data later this week. A stronger-than-expected US jobs report has increased expectations that the Federal Reserve could raise rates this month.

Swiss stocks hit by Novartis decline

Switzerland’s market was weighed down by a sharp decline in Novartis. The pharmaceutical giant fell 3.3% after its experimental drug pelacarsen failed to meet a key objective in a late-stage clinical trial.

In Germany, investors were also assessing the political fallout from weekend state elections in Saxony-Anhalt, where the far-right Alternative for Germany emerged as the leading party with 44% of the vote in exit polls. The result represented a setback for Chancellor Friedrich Merz.

Eurozone data, US holiday ahead

Investors will also assess second-quarter economic data from the euro zone due later on Monday for further clues about the region’s growth trajectory.

Trading activity could remain relatively subdued as US financial markets are closed for a public holiday, potentially reducing liquidity across European markets.

(Disclaimer: This article is based on inputs from agencies. These do not represent the views of The Economic Times)