Market wrap: Strong sell-off in European equities amid the energy crisis 🔔

• European stock markets started the week with sharp declines as the escalation of the conflict with Iran led to a surge in oil prices and triggered risk-off sentiment.

• The STOXX 600 index is losing as much as 2.00%, deepening last week’s decline of 5.51%, leaving the index nearly 7.30% below its February record. Major indices, including DE40, FRA40, UK100, and SPA35, are down between 1.50–2.50%. The VSTOXX volatility index is gaining nearly 4.00% to 30.30 points — the highest level since April.

• Oil prices have risen by more than 50% in March alone, briefly approaching 120 USD per barrel, following the escalation of attacks on Iranian energy infrastructure and disruptions to transport through the Strait of Hormuz, effectively immobilizing a key route responsible for around 20 million barrels per day of global supply.

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• Gas prices in Europe surged amid fears of supply disruptions. Natural gas futures jumped more than 14% to 62 EUR/MWh, after an earlier 65% increase in the previous week from around 30 EUR/MWh.

• LNG flows have declined, and the Ras Laffan LNG facility in Qatar has been shut down. At the same time, EU gas storage levels remain below 30%, increasing concerns about potential energy shortages.

• Germany recorded a sharp drop in industrial orders of 11.1% m/m in January, far worse than the expected –4.5%, reversing December’s +6.4% increase. Domestic orders fell by 16.2% and foreign orders by 7.1%, while industrial production declined by 0.5%. The weakness was largely driven by high volatility — orders in the metal products sector fell by 39.4%, while the automotive industry rose by 10.4%.

• Yields on European government bonds are also rising, with investors beginning to price in a 25 bp ECB rate hike by July.

• Energy companies were among the few beneficiaries of rising oil prices, while most sectors declined. The banking sector is down more than 3.2%, real estate 3.1%, and the basic resources sector is among the biggest losers. Airlines came under pressure from rising fuel costs — Lufthansa fell 3.9%, while Air France-KLM dropped 4.1%. Defense companies are gaining, including Italy’s Leonardo (+4.00%).

• Among large companies, Rolls-Royce is down 3.83%, while Anglo American is losing around 6.30%, reflecting the broad sell-off in cyclical sectors. Roche fell 4.75% after its oral breast cancer drug failed to meet the primary endpoint in a clinical trial.

• Iran announced Mojtaba Khamenei as the new Supreme Leader, reinforcing a more hardline political stance during the ongoing war with the US and Israel.

• IMF Managing Director Kristalina Georgieva warned policymakers to “prepare for historic shocks.”