European shares fell further Monday as oil prices surged toward $120 a barrel, deepening inflation fears and rattling risk appetite amid the US-Israeli war on Iran, which shows no sign of easing. The latest bout of volatility underscored the market’s sensitivity to energy shocks and supply disruptions tied to the conflict in the Middle East.
London’s benchmark slipped 1% in afternoon trade, while the Paris CAC 40 lost 1.7% and Frankfurt’s DAX dropped 1.4%. Dublin’s market fell 1.3%, with Kingspan, Cairn Homes and Ryanair among the notable decliners as investors rotated out of economically sensitive names.
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Crude jumped more than 15% to just shy of $120, with traders bracing for prolonged shipping delays and supply shortfalls as tensions escalate. Maritime traffic in the Strait of Hormuz—transit point for roughly a fifth of global crude and gas—has all but halted since the war began on Feb. 28, amplifying concerns over near-term availability and price spikes.
Sector moves reflected the energy shock. Banks, at the center of last week’s sell-off, extended losses with a 3.2% decline as higher-for-longer inflation implied costlier funding and weaker loan demand. Technology stocks fell 3.1% amid rising discount rates and risk aversion. By contrast, energy names eked out a 0.1% gain on higher crude realizations, and defense contractor Leonardo rose 1.4% on expectations of sustained demand.
Policy signals remained in focus. Investors looked to remarks by European Central Bank President Christine Lagarde, while board member Piero Cipollone and eurozone finance ministers were due to speak at a Eurogroup meeting later in the day. Fresh data pointed to persistent industrial softness, with German factory orders falling more than expected in January.
The shock rippled through Asia earlier in the day. Japan’s Nikkei closed down more than 5% and South Korea’s Kospi sank 6% after oil prices vaulted above $100 per barrel for the first time in almost four years, sharpening fears of imported inflation and slowing growth across energy-dependent economies.
US President Donald Trump dismissed the oil spike as a “small price to pay” to eliminate Iran’s nuclear threat, reiterating the White House’s view that the surge will prove temporary. “Short term oil prices, which will drop rapidly when the destruction of the Iran nuclear threat is over, is a very small price to pay for USA, and World, Safety and Peace,” he wrote on social media, adding: “ONLY FOOLS WOULD THINK DIFFERENTLY!”
Energy security is once again a front-burner issue for major importers. Japan—the world’s fourth-largest economy and fifth-biggest crude importer—relies on the Middle East for roughly 95% of its oil, with about 70% of those flows historically transiting Hormuz before the conflict. Prime Minister Sanae Takaichi said on March 2 that Japan holds emergency oil reserves equivalent to 254 days of domestic consumption. Kyodo News reported Friday, citing an unnamed source, that Tokyo is considering releasing some reserves to cushion the blow.
South Korea is the world’s fourth-largest crude importer, heightening the stakes for Seoul as shipping bottlenecks and price volatility persist. China remains the biggest global buyer of oil, illustrating the broad reach of the current shock across Asia’s manufacturing and export hubs.
With energy costs climbing and shipping lanes constrained, European markets face another week of headline-driven swings. Traders will parse every signal from the ECB and Eurogroup for clues on how policymakers intend to balance inflation control with growth risks as the conflict and supply disruptions overshadow otherwise incremental economic data.
By Abdiwahab Ahmed
Axadle Times international–Monitoring.
