European equity markets opened the week sharply lower on Monday as oil prices spiked, with escalating tensions in the Middle East raising concerns about disruptions to global energy supplies.
At 08:05 GMT, Germany’s DAX index was down 2.1%, France’s CAC 40 had fallen 2.4%, and the UK’s FTSE 100 slipped 1.6%.
Crude jumps as Middle East tensions intensify
The situation in the Middle East worsened over the weekend as the United States and Israel launched additional airstrikes across Iran, targeting several locations including oil storage facilities.
At the same time, major regional producers — Kuwait, Iran and the United Arab Emirates — have reduced output, while tanker movements through the Strait of Hormuz have nearly stopped since hostilities began roughly a week ago. The narrow waterway typically carries about one-fifth of global oil shipments.
These developments have driven crude prices above $110 per barrel, levels not seen since Russia’s invasion of Ukraine in 2022. If the conflict persists, analysts warn that prices could potentially approach record levels around $150 per barrel.
Brent crude futures jumped 15% to $106.55 per barrel, while U.S. West Texas Intermediate futures climbed 12% to $101.92 per barrel.
No end in sight
Oil prices had already been rising last week, although not as dramatically, as many investors initially believed the conflict might remain short-lived and that global oversupply would eventually push crude prices lower.
However, several reports indicate that Iran has appointed Mojtaba Khamenei, son of the assassinated Ayatollah Ali Khamenei, as the country’s new Supreme Leader on Sunday. The move suggests the leadership is unlikely to soften its stance in the near term.
U.S. President Donald Trump has already stated that he views Mojtaba Khamenei as an “unacceptable” choice, raising the prospect of further escalation.
Trump also addressed the surge in oil prices, saying that short-term increases were a “small price to pay” for eliminating Iran’s nuclear threat. Rising global energy prices are already beginning to affect fuel costs at gas stations across the United States.
Concerns about global economic conditions
Beyond geopolitical developments, the European corporate calendar is quiet on Monday with no major earnings releases scheduled, following what has generally been a relatively solid quarter.
On the economic front, data released earlier showed that German factory orders plunged 11.1% in January — a much steeper drop than the 4.2% decline economists had expected and a sharp reversal from the 6.4% increase recorded the previous month.
German industrial production also declined by 0.5% in January, following a 1.0% fall in the preceding month.
Meanwhile, worries about the broader global economy intensified late last week after data revealed the U.S. economy unexpectedly shed jobs in February and the unemployment rate rose to 4.4%. The figures could indicate weakening labor market conditions, potentially placing the Federal Reserve in a difficult position as it balances slowing growth against the inflationary impact of higher oil prices.
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