European Markets Slide as U.S.-Iran Conflict Escalates, Oil Prices Surge
European markets are set to open sharply lower on Tuesday as rising geopolitical tensions in the Middle East rattle investor confidence. Market sentiment has deteriorated following fresh developments in the escalating conflict between the United States and Iran, now entering its fourth day. Traders across the continent are bracing for volatility as uncertainty deepens over the potential economic fallout.
The FTSE 100 is projected to open 0.7% lower, while Germany’s DAX is expected to fall 1%. France’s CAC 40 is seen declining 0.75%, and Italy’s FTSE MIB is forecast to drop 0.6%, according to IG data. The expected downturn mirrors broader global weakness, with U.S. futures and Asian markets also sliding as investors adopt a risk-off stance.
Tensions intensified overnight after Saudi Arabia’s defense ministry confirmed that two drones struck the U.S. embassy in Riyadh. Meanwhile, reports from Iranian media cited by Reuters said an Iranian Revolutionary Guard commander declared the strategic Strait of Hormuz closed — a move that could severely disrupt global oil supply. The strait is one of the world’s most critical oil transit routes, and any prolonged closure could send energy prices soaring and strain global trade.
Energy markets have already reacted sharply. Global crude oil prices jumped amid fears that vital oil infrastructure could be targeted, raising concerns about renewed inflationary pressure worldwide. Safe-haven assets such as gold have surged as investors seek protection from volatility. Market anxiety grew further after U.S. President Donald Trump indicated that the conflict could last four to five weeks — or potentially much longer — while additional U.S. forces are reportedly being deployed to the region.
European policymakers are urging calm. The European Union has called for maximum restraint and the protection of civilian lives, warning that further escalation could destabilize not only the Gulf region but also global markets. On the economic front, investors are also watching corporate earnings from Thales, Alcon, ASM International, Kuehne + Nagel, and Schaeffler, alongside flash euro zone inflation data expected to show February inflation steady around 1.7%. For now, however, geopolitics remains firmly in the driver’s seat of market sentiment.