European Stocks Weaken, Oil Rises After Latest Middle East Attack
European stocks opened lower on Wednesday (June 3), as markets weighed the latest escalation in the Middle East that has dampened hopes for a quick deal to end the Iran war. The Stoxx 600 Index fell 0.2%, with Germany's DAX down 0.7% and France's CAC 40 down 0.4%, while the UK's FTSE 100 was relatively flat.
On the geopolitical front, the US military said Iranian airstrikes on Kuwait, Bahrain, and several other targets were repelled or missed their targets, according to a Reuters report. Iranian state media also reported that the IRGC claimed to have attacked the US Fifth Fleet headquarters in Bahrain in retaliation for a US attack on a communications tower south of Qeshm.
Oil prices rose on concerns that Washington-Tehran negotiations could stall, potentially prolonging the conflict and further thwarting the possibility of normalizing energy links in the region. Brent rose 1.7% to around US$97.67 per barrel, as the market monitored risks to smooth access to the Strait of Hormuz.
The oil rally also pushed eurozone government bond yields higher and added pressure to stocks, particularly sectors sensitive to energy costs and interest rates. The yield on the 2-year German bond rose 3 basis points to 2.654%, and the 10-year bond rose 2.5 basis points to 3.0%. At the same time, investors began to increase expectations for ECB policy tightening to counter energy-driven inflation, with the market seeing a more than 50% chance of three interest rate hikes by the end of 2026.
Sectoral movements reflected this transmission channel: airlines such as Lufthansa and Air France fell around 1% due to the risk of rising fuel costs. Automotive stocks also suffered, while retail provided support after Inditex rallied, supported by a 5.4% increase in first-quarter profits and a positive assessment of early summer demand. Beyond geopolitical factors, sentiment is also weighed down by trade policy uncertainty after the US proposed additional tariffs of up to 12.5% on dozens of trading partners, including the European Union, China, and Japan. (asd)
Source: Newsmaker.id
