A market sell-off resumed on Thursday as investors confronted an uncomfortable reality: the U.S.–Israel war with Iran is no longer a “headline risk” — it’s starting to behave like an energy shock, and that changes everything from inflation expectations to interest-rate forecasts.
Early optimism in Europe (after a rebound in Asia) didn’t last. By the end of the day, losses had spread across both sides of the Atlantic as traders priced in a longer conflict, tighter energy supply, and the possibility that central banks will have less room to cut rates.
Europe: broad declines as energy worries return
Major European indexes finished sharply lower:
- London’s FTSE 100 closed down 1.5%
- France’s CAC fell 1.5%
- Germany’s DAX dropped 1.6%
- Italy’s FTSE MIB fell 1.6%
- Spain’s IBEX slid 1.4%
The message was consistent across markets: when oil and gas keep climbing, investors start rethinking the “cuts are coming” narrative.
Wall Street: deeper losses as volatility spreads
In the U.S., the sell-off also strengthened by early afternoon in New York:
- Dow Jones down roughly 2%
- S&P 500 down about 1.3%
- Nasdaq down around 1%
The pattern fits a familiar playbook: rising energy prices revive inflation fears, which pushes yields up — and that pressures equities, especially rate-sensitive sectors.
Oil and gas: the real driver
Energy prices stayed firmly on an upward trajectory:
- Brent crude rose about 4% to nearly $85 a barrel
- European gas prices gained more than 3%
- Brent has surged about 15% in the past five days
That kind of move doesn’t just hit motorists. It hits airlines, shipping, manufacturing costs, and consumer sentiment — and it can quickly feed into the inflation picture central banks are watching.
Airlines get hit first (and hard)
Travel stocks absorbed some of the sharpest pain as higher fuel costs and regional disruptions collide:
- Wizz Air fell 11.3% after canceling flights to and from Israel, Dubai, Abu Dhabi, and Amman until March 15, warning of a €50 million hit to annual profits tied partly to higher fuel costs.
- easyJet dropped about 5%
- IAG (British Airways owner) slipped about 2%
Airlines are often the early warning system in geopolitical energy shocks: they get squeezed by fuel prices and demand uncertainty at the same time.
Rates: the “cuts soon” story takes another hit
U.S. Treasury yields were on track to rise for a fourth consecutive day — a sign that markets are reassessing how quickly the Federal Reserve can ease policy if energy prices keep climbing.
And looming over everything is the Strait of Hormuz. Tanker movement there has been severely constrained, and the strait is a critical artery for global oil and LNG flows. If shipping doesn’t normalize, the energy shock risks becoming more entrenched.
Bottom line
Markets don’t panic because of war headlines alone — they panic when war starts moving commodities, especially energy. With oil and gas climbing and Hormuz traffic strained, investors are treating this as a scenario that could re-ignite inflation and delay rate cuts.
