March 12 (Reuters) - European shares extended losses on Thursday after investors grappled with a surge in oil prices, which exacerbated concerns about inflation amid the war in the Middle East. The
European shares decline as oil surge fuels inflation worries
Market Reaction to Oil Price Surge and Inflation Concerns
By Avinash P
March 12 (Reuters) - European shares extended losses on Thursday as investors grappled with a surge in oil prices, which exacerbated concerns about inflation amid the war in the Middle East.
Stock Market Performance
The pan-European benchmark STOXX 600 fell 0.4% to 600 points at 0931 GMT, and was on track to end lower for the seventh time in nine sessions this month.
Impact of Oil Prices
Crude prices climbed back to $100 a barrel after Iranian boats appeared to have attacked two fuel tankers in Iraqi waters, as the conflict between Iran and U.S.-Israeli forces looked far from resolved. [O/R]
Inflation could edge higher in Europe, which is heavily dependent on oil imports, if crude prices remain elevated for an extended period, adding pressure to already tepid regional growth.
Expert Commentary
"European stocks (are) seen as more vulnerable kinds of assets as Europe is obviously a very energy-hungry economy with a lot of manufacturing companies that depend on where fuel prices are (and) a very big and important component of the cost structure", said Marija Veitmane, head of equity research at State Street.
Central Bank and Sector Impacts
Money markets were pricing in a European Central Bank rate hike by July, with an 85% probability of another increase by December, a stark shift in expectations before the conflict started, when they were betting on a rate cut.
The economically-sensitive bank sector in Europe continued its slide and led declines in other sectors, with a 2.2% drop.
Bank Sector Vulnerabilities
Veitmane said European banks remain vulnerable because profits are being supported by non‑core businesses such as investment banking and capital markets, rather than stronger growth in net interest income and lending over the longer term. "That's good for profits for this year, but it's very hard to make a case that will continue for a long time."
Europe's volatility gauge remains elevated and near levels last reached in April 2025 during liberation day tariff announcements.
Corporate Earnings and Sector Highlights
Positive Earnings Updates
Tempering losses early in the session were some upbeat earnings updates. Leonardo's shares hit a record high and were last up 8% after the defence group said it was "positioned on a path of strong growth", with orders, revenues and core profits set to rise further this year.
The overall defence index rose 1.7%.
Daimler Truck added 3.8% after guiding for a broadly stable 2026 profit margin in its industrial business.
Zalando jumped 10% after the online fashion retailer forecast growth in full-year adjusted operating profit in 2026.
Shares of French inflammatory-disease specialist Abivax climbed 16.7% after new media report on takeover rumours.
Negative Performers
On the flip side, BMW's shares declined 1.1% after the carmaker forecast a moderate decline in group pre-tax earnings this year and stagnation in deliveries.
The broader auto sector also dropped 1%.
(Reporting by Avinash P in Bengaluru; Editing by Rashmi Aich and Shinjini Ganguli)
