Sharp Declines in European Markets

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•  03 Mar 2026
 

Following steep losses in Asia, European markets are trading sharply lower, while U.S. index futures point to declines of up to 2%.

European equities extended yesterday selloff, tracking weakness in Asia as investors continue to de-risk amid escalating conflict in the Middle East, a sharp rise in energy prices, and renewed inflation concerns. Broad equity benchmarks are recording their steepest two-day decline in several months.

The STOXX Europe 600 is down approximately 2.8% to 610. The Euro Stoxx 50 is falling 2.9% to 5,818. Germany DAX is lower by 3.2% at 23,877. In Paris, the CAC 40 declines 2.4% to 8,197. London FTSE 100 weakens 2.2% to 10,539. Spain IBEX 35 drops 3.6% to 17,242, and Italy FTSE MIB falls 3.4% to 44,697.

The selloff is broad-based across sectors, with airlines under particular pressure. Banking stocks lead declines, down roughly 2.7%. In contrast, the energy sector is advancing, supported by a more than 5% rise in Brent crude to $82 per barrel and a surge of over 65% in European natural gas prices since Friday.

In London, BAE Systems is up about 6% on increased demand expectations for defense products. BP and Shell are gaining alongside higher energy prices. In Germany, energy and heavy industrial stocks are relatively less affected by the broader downturn. In Paris, TotalEnergies rises around 3%. Conversely, Zurich Insurance Group declines about 5% after announcing a $5 billion capital raise. Airline, luxury, and banking stocks are weakening sharply across exchanges.

The market is also reacting to warnings from economists at the European Central Bank and the Bank of England that a prolonged conflict could trigger a renewed inflation spike and reduce output. Rate-cut expectations are retreating quickly. In the UK, food inflation data showed slight moderation, but economists remain particularly concerned about the impact of rising energy prices. Energy costs permeate nearly every sector when energy rises, transportation costs increase, goods become more expensive, and travel and tourism costs climb. Energy is a significant component of the inflation basket itself.

Losses are expected to continue into the U.S. open, after major indices previously managed to recover from early declines and close higher. Escalation risks and the prospect of a protracted conflict are weighing on U.S. consumer sentiment, with polls suggesting limited public support for continued military engagement.

However, statements from Donald Trump and other U.S. leaders indicate support for continuing the war until Iran nuclear threat is eliminated. Initial estimates suggested a conflict lasting up to four weeks; assessments are now shifting toward a longer timeline, increasing the probability that energy-driven inflation remains embedded in the macro-outlook rather than transitory.

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