Major European stock markets fell across the board on August 31. The renewed escalation of tit-for-tat attacks between the United States and Iran strengthened investors’ risk-averse stance, sending crude oil prices higher while broad-based selling pressure hit a wide range of stocks. The London market was closed for a bank holiday, leaving trading thin.
The Euro Stoxx 50 index, which tracks blue-chip stocks in the eurozone, fell 1%. With the London Stock Exchange closed for the holiday, overall European market trading volume was roughly 40% below normal levels.
Amid escalating tensions in the Middle East, November-delivery North Sea Brent crude briefly topped $90 per barrel. Reports that a tanker struck a mine in the Strait of Hormuz also fueled concerns over energy supply, pushing crude prices higher.
Rising oil prices provided a tailwind for oil-related stocks. France’s TotalEnergies rose 1.15%, Anglo-Dutch Shell gained 0.25%, and Italian hydrocarbon giant Eni climbed 2.26%. The oil majors helped underpin European equity indices.
On the flip side, German renewable energy major Siemens Energy plunged 5%. Reports that SpaceX and Tesla, led by Elon Musk, are moving into solar power capacity construction raised concerns over intensifying competition in the renewable energy sector.
Among country-specific benchmarks, Germany’s DAX index slipped 0.17%, France’s CAC 40 fell 0.79%, Italy’s FTSE MIB edged down 0.01%, and Spain’s IBEX 35 declined 0.34%. The UK’s FTSE 100 was not traded due to the market holiday.
European equities had posted modest gains through August but entered a consolidation phase ahead of September. Historical data suggests European stock markets have struggled to sustain upward momentum in September.
By sector, auto stocks were relatively resilient, while technology and capital goods/industrial stocks fell amid rising government bond yields. Some investors note that despite the ongoing deterioration in the Middle East, equity markets have gradually priced in the impact of the conflict over the past six months.