Europe close: Stocks fall as oil prices tick higher

(Sharecast News) - European shares fell on Wednesday as oil prices climbed amid renewed attacks linked to Iran in the Strait of Hormuz, heightening inflation concerns and raising the prospect of further interest rate pressure from the European Central Bank. The pan-European Stoxx 600 declined 0.83% to 601.09.

Germany's DAX dropped 1.59% to 23,587.78, while France's CAC 40 slipped 0.51% and London's FTSE 100 fell 0.56% to 10,353.77, as energy-driven inflation fears weighed on investor sentiment.

"The UK's major stock indexes took a hit on Wednesday as volatile oil prices, fueled by ongoing tensions in the Middle East, kept investors on edge," said Patrick Munnelly, market strategy partner at TickMill.

"Adding to the market's woes, a series of lacklustre corporate earnings reports dampened sentiment further."

Oil markets remain a central focus

Brent crude was last up 5.1% on ICE at $92.28 a barrel, while the NYMEX quote for West Texas Intermediate gained 4.9% to $87.54.

Prices had fallen sharply overnight after reports that the International Energy Agency was preparing the largest emergency oil reserve release in its history before rebounding when news emerged that three vessels had been struck by projectiles while passing through the Strait of Hormuz.

"Brent crude prices surged past the $90-per-barrel mark, as skepticism mounted over the International Energy Agency's reported plan for an unprecedented release of oil reserves," Munnelly said.

"Earlier in the day, this announcement had briefly sent oil prices tumbling, but doubts lingered about whether it could effectively counterbalance the supply disruptions stemming from ongoing geopolitical conflicts."

The IEA later confirmed it would release 400 million barrels of oil reserves to stabilise global markets following supply disruptions caused by the conflict involving the United States, Israel and Iran.

The planned intervention, far exceeding the 182 million-barrel release coordinated after the Russian invasion of Ukraine, came as shipments through the vital waterway collapsed.

Export volumes were currently running at less than 10% of pre-conflict levels, with the blockade of the strait estimated to have removed about 15 million barrels of crude per day from global markets.

"Trump might have declared the war was running ahead of schedule, but no one seems to have told the Iranians," said Chris Beauchamp, chief market analyst at IG.

"The US may well be running out of targets, but Iran has settled in for a long conflict, continuing to target energy infrastructure and shipping. It has barely started on the latter, but has already choked off the key waterway.

"Despite the release of IEA reserves, it looks like oil has bottomed out for now, ratcheting up the pressure on the US administration to find a way to end the conflict.

"Neither its opponent nor its ally however seem in any mood to stop yet."

According to the UK Maritime Trade Operations service, vessels were struck off Dubai, the UAE coast and north of Oman, prompting the evacuation of crews.

US officials also said military strikes had destroyed 16 vessels believed to be laying naval mines in the strait, which normally handles around 20% of global oil shipments.

Prices had surged to $119.50 earlier in the week before dropping below $90 as reports emerged that the IEA was preparing coordinated action.

Inflation risks were also highlighted by ECB governing council member Peter Kazimir, who told Bloomberg the balance of risks for inflation had shifted.

While he said the ECB was in a "good place" and there was no need to act at next week's policy meeting, he warned that businesses and workers could attempt to recover earlier losses through higher prices and wages.

"The balance of risks regarding inflation has clearly shifted to the upside. We can forget about all the discussions about an inflation undershoot," he said.

US consumer prices rise faster, German inflation eases

Economic data provided a mixed backdrop.

In the United States, consumer prices rose 0.3% in February following a 0.2% increase in January, according to the Bureau of Labor Statistics, while the annual inflation rate held at 2.4%.

Core inflation, which excludes food and energy, rose 0.2% on the month and stood at 2.5% year-on-year.

Shelter costs rose 0.2%, food prices increased 0.4%, and energy costs climbed 0.6%.

In Germany, inflation eased slightly in February, with the consumer price index rising 1.9% year-on-year, according to the Destatis, down from 2.1% in January.

The harmonised index of consumer prices rose 2% annually, while monthly CPI increased 0.2%.

Rheinmetall tumbles, Inditex bucks the trend

In equities, Rheinmetall dropped 8.02% despite reporting full-year sales of €9.94bn and profits of €1.68bn and saying it was in a "prime position" to help replenish US missile stockpiles used in the conflict.

Porsche slipped 0.82% after warning of a challenging year and outlining plans to cut costs and streamline management structures.

Elsewhere, Gerresheimer tumbled 8.74% after further delaying the release of its 2025 financial statements to June amid investigations into business deals.

On the upside, Inditex rose 1.03% after the Zara owner reported first-quarter earnings broadly in line with expectations and said all of its brands delivered year-on-year growth despite weaker December sales.

Reporting by Josh White for Sharecast.com.