European equities surrendered additional ground on Thursday as a fresh move higher in oil prices renewed fears about rising inflation against the backdrop of conflict in the Middle East.
The pan-European STOXX 600 index moved down 0.5% to 599 points by 0814 GMT, marking what looks set to be the seventh decline in nine trading sessions so far this month.
Crude oil returned to about $100 a barrel after reports that Iranian boats appeared to have attacked two fuel tankers in Iraqi waters, a development that came as fighting involving Iran and U.S.-Israeli forces showed no sign of abating. The jump in oil weighed on investor sentiment because Europe imports a large share of its oil - a sustained period of higher crude would likely push inflation higher and add strain to already subdued regional growth.
Money markets have reacted to the inflation risk by pushing up expectations for European Central Bank rate moves. Markets were pricing in a rate increase by July and placed an 85% probability on an additional hike by December.
Sector performance in Europe reflected the economic sensitivity of different industries. The banks sector, which tends to be closely tied to economic activity, led losses with a 1.1% decline. By contrast, defence stocks gained around 1.3% on ongoing geopolitical worries.
The auto sector also moved lower overall, down 1.2%. Within autos, BMW shares fell 2.3% after the carmaker projected a moderate decline in group pre-tax earnings for the year and said deliveries were expected to stagnate. Daimler Truck bucked the direction in autos, firming 0.7% after guiding for a broadly stable 2026 profit margin in its industrial business.
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Market context
- STOXX 600 down 0.5% to 599 by 0814 GMT, set for seventh drop in nine sessions this month.
- Crude oil rose back to about $100 a barrel after reported attacks on two fuel tankers in Iraqi waters.
- Money markets price in a likely ECB rate hike by July and an 85% chance of another increase by December.
Notable movers
- Banks sector declined 1.1% as economically-sensitive names underperformed.
- Defence stocks rose 1.3% amid geopolitical concerns.
- BMW shares fell 2.3% after guidance for lower pre-tax earnings and stagnant deliveries; Daimler Truck rose 0.7% on a stable 2026 industrial margin outlook.