London - Major European stock indices plunged further on Tuesday, extending losses from Monday's broad decline as escalating tensions in the Middle East rattled investor confidence.
This file photo taken on Aug 26, 2024 shows an interior view of the Frankfurt Stock Exchange in Frankfurt, Germany. (Photo/Xinhua)
London's benchmark FTSE 100 index fell by more than 3 percent at several points during the session and closed at 10,484.13 points, down 2.75 percent. The Paris CAC 40 index closed at 8,103.84 points, down 3.46 percent.
Germany's benchmark DAX index dropped by more than 4 percent at one point and ended the day at 23,790.65 points, down 3.44 percent.
On Monday, the three indices had already fallen by around 1.2 percent, 2.2 percent and 2.6 percent, respectively.
The escalating conflict in the Middle East and fears of a new wave of inflation amid rapidly rising energy prices caused European stock markets to tumble, German news television channel n-tv reported.
"The fear of an oil shortage due to the blockade of the Strait of Hormuz is triggering a wave of selling today," IG analyst Christian Henke commented, noting that the longer this strategically important strait remains blocked, the more expensive oil could become.
Brent crude, the international benchmark, jumped about 9 percent to above 85 U.S. dollars per barrel on Tuesday, its highest level since July 2024.
The prolonged conflict in the Middle East could represent the "worst-case scenario" for markets: not a one-time military strike, but weeks of disruption to trade and energy flows, according to German daily Die Welt.
"This unprecedented conflict is obviously creating economic and financial uncertainties that we must monitor very closely," French Economy Minister Roland Lescure said during a press briefing.
In its latest economic and fiscal forecast released on Tuesday, Britain's independent fiscal watchdog, the Office for Budget Responsibility, said the conflict in the Middle East could have "very significant impacts" on the global and UK economies.
According to Nicolas Gallant, a financial analyst, a short war with Iran could be followed by gradual normalization. However, a prolonged conflict marked by indirect attacks on Gulf energy facilities, repeated disruptions in the Strait of Hormuz, or a broader regional escalation would create a more structural shock.