Stocks Drop as Inflation Fears Grow Due to the Oil Surge – Europe Market Wrap

Global equities fell further as a new surge in oil and petrol prices fuelled fears that the Middle East war will spark inflation and slow GDP. Bonds fell during the second day of major central bank meetings.

European shares slumped 2%, approaching their lowest level of the year. The benchmark for Asian stocks fell 2.8%. Futures for the S&P 500 were slightly changed as the US benchmark erased its weekly gain in the previous session.

Government bond yields soared across Europe and Asia. Traders placed bets on two rate hikes by the ECB this year and are now anticipating a similar move by the BoE. Both are set to make decisions later today, after Swiss and Swedish authorities kept interest rates unchanged.

The rate on two-year UK gilts increased by 12 bps to 4.22%, the highest since March 2025. The yield on German bunds of identical duration rose seven basis points to 2.50%. The yield on two-year Treasuries was 3.81%, up 3 bps.

Gold slid 2.5% to below $4,700 per ounce. The Dollar remained quite stable. The Japanese Yen declined 0.4%, with traders concerned about the Yen’s likely breach of 160 against the Dollar.