European Stocks Close Lower Amid Middle East Conflict
European stocks closed sharply lower on Monday (March 2, 2026), retreating from record levels they had tested last week following the outbreak of war in the Middle East. The Euro STOXX 50 fell around 2.5% to 5,987, while the STOXX 600 weakened 1.5% to around 624, recording its worst session in more than seven months.
Pressure stemmed from a surge in geopolitical risk premiums after the US-Israeli attack on Iran triggered retaliatory strikes in the region, which added to concerns about disruptions to energy supplies and logistics routes. Markets responded with a risk-off response, while the oil rally and surging gas prices lifted inflation expectations—pushing European yields up and tightening financial conditions.
The banking sector was among the hardest hit due to a combination of rising yields, credit risk, and regional exposure. Several major European banks—including Santander, BBVA, and Intesa Sanpaolo—were hit hard, while the broader financial sector was also dragged down.
Consumer discretionary and automotive stocks also weakened as the prospect of higher inflation potentially curbs purchasing power and slows interest rate cuts. Luxury goods stocks such as Inditex, LVMH, Hermès, and carmakers like BMW and Volkswagen recorded deep corrections, in line with the rotation out of cyclical assets.
On the other hand, energy and defense stocks strengthened as the market placed a premium on issuers that benefit from rising commodity prices and increased military spending. With the market heavily headline-driven, investor focus is now on developments in the conflict and whether the energy boom will last long enough to change the direction of inflation and monetary policy in Europe. (yds)
Source: Newsmaker.id
