BRUSSELS/FRANKFURT/PARIS (dpa-AFX) - European stocks were sharply lower on Tuesday and headed for their biggest two-day drop since April as escalating Middle East tensions spurred risk aversion in financial markets.
A prolonged conflict in the Middle East and a persistent fall in oil and gas supplies from the region could cause a 'substantial spike' in inflation and a 'sharp drop in output' in the euro zone, ECB chief economist Philip Lane has warned in an interview with the Financial Times.
European natural-gas prices surged more than 20 percent today following a production halt at the world's largest liquefied-natural-gas export facility in Qatar.
The jump in oil and gas prices evokes memories of Russia's invasion of Ukraine in 2022, which triggered a global energy crunch and hit Europe particularly hard.
U.S. President Trump said the conflict with Iran will likely last four to five weeks and that the U.S. has the 'capability to go far longer than that', raising concerns about a significant widening of hostilities in the region.
The pan European Stoxx 600 was down 2.3 percent at 609.62 after tumbling 1.6 percent on Monday.
The German DAX plummeted 2.6 percent, France's CAC 40 gave up 1.9 percent and the U.K.'s FTSE 100 was down 2.2 percent amid rapidly rising bond yields.
Banks extended losses from the previous session, with Commerzbank, Deutsche Bank, BNP Paribas and Barclays plunging 4-5 percent.
International Workplace shares were down 3 percent in London. The global leader in hybrid working reported broadly stable earnings for 2025 with marginal increase in revenue.
Industrial engineering company Smiths Group dropped 1.4 percent after it has agreed to acquire DRC Heat Transfer (DRC) for a purchase price of £164m.
Construction giant Kier Group dropped 2 percent despite reporting strong half-year results.
Low-cost airline Wizz Air slumped 5 percent and Ryanair lost 2.2 percent as oil prices jumped above $80 a barrel on supply disruption fears.
French aerospace and technology firm Thales declined 1.6 percent despite reporting better-than-expected fourth-quarter results.
In economic releases, U.K. shop price inflation eased in February largely due to the fall in non-food prices, the British Retail Consortium said.
Shop price inflation softened to 1.1 percent in February from 1.5 percent in the previous month. Prices were expected to climb 1.4 percent.
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