European stock exchanges recorded drastic declines following the escalation of armed conflict in Iran. In just two days, over 870 billion euros evaporated from the market, with indices in Milan and Madrid plunging by almost 4 percent. A sharp rise in oil and natural gas prices is fueling fears of a return to high inflation, prompting investors to massively sell off risky assets in favor of safe havens.

Massive Capital Losses

Over 870 billion euros in market value evaporated from European stock exchanges in two days.

Drastic Rise in Energy Prices

The war in Iran caused a sharp spike in oil and gas prices, raising fears of a new wave of inflation.

Weakness of Southern Europe

Exchanges in Milan and Madrid lost the most, recording drops of around 4 percent in a single session.

Pressure on Bonds

Yields on Italian BTP bonds are rising, and the spread against German bonds is reaching new highs.

The escalation of hostilities in the Middle East, particularly the attack on Iran, has led to the most severe sell-off in European capital markets in nearly a year. Investors across the continent hastily withdrew capital, resulting in a staggering 870-billion-euro drop in the market value of companies in just two trading sessions. Southern European markets suffered the most – the Italian FTSE MIB and Spanish IBEX 35 indices closed the session with losses exceeding 3.9 percent. The German DAX once again fell below the psychological barrier of 24,000 points, losing nearly 7 percent of its value over two days. Analysts emphasize that the market reacted with panic fear of a lasting disruption in energy resource supplies, which directly translated into double-digit increases in oil and blue fuel prices. For decades, the situation in the Middle East has been the most significant risk factor for the global economy due to key transport routes, such as the Strait of Hormuz, through which approximately 20 percent of global oil consumption flows.Simultaneously with the stock market crash, investors observed alarming signals in the debt market. Yields on government bonds, including Italian BTPs, began to rise sharply, leading to a widening of the risk margin, the so-called spread against German bunds to a level of 72 basis points. Although Wall Street attempted to recover some losses during its session, global sentiment remains strongly bearish. The scenario of a prolonged conflict calls into question previous economic growth forecasts for the eurozone, threatening the phenomenon of stagflation. „Europa affonda con timori escalation, Milano la peggiore con Madrid” (Europe sinks on escalation fears, Milan the worst with Madrid) — Market Analyst (Il Sole 24 ORE)In the shadow of high politics and the stock market crash, a few entities are trying to continue their development plans. An example is the German company Gabler, a supplier of systems for submarines, which, despite the unfavorable market climate, is proceeding with its stock market listing process. However, for most of the industrial and technology sector, the current situation means a drastic cut in valuations. Experts warn that if the conflict is not quickly extinguished through diplomatic means, the energy sector may become the sole beneficiary of the crisis, while the rest of the real economy will feel the effects of a sharp increase in production and transport costs.

Perspektywy mediów: Liberal media place greater emphasis on systemic inflationary risk and the necessity of European Central Bank intervention to support the economy. Conservative media stress the need to strengthen energy and defense independence and criticize excessive dependence on raw materials from the East.