Oil Prices Jump, European Markets Plummet As US-Iran Tensions Rise: What's Driving Markets Thursday?

With Wall Street shut for Juneteenth, global investors turned their eyes to the escalating conflict between Israel and Iran, triggering a sharp oil price rally and pulling European stocks to multi-week lows.

West Texas Intermediate crude futures climbed past $76.50 per barrel on Thursday, marking their highest level since January. Investors responded to rising geopolitical risk after Tel Aviv said it targeted Iranian nuclear sites in retaliatory strikes, prompting fears of a broader regional conflict.

The tension grew after The Wall Street Journal reported President Donald Trump had approved U.S. military plans for Iran but held back from issuing a final order. Trump responded on Truth Social, saying, "The Wall Street Journal has No Idea what my thoughts are concerning Iran!"

The potential for a U.S. military entry into the conflict has revived fears of shipping disruptions through the Strait of Hormuz, a chokepoint through which roughly 20% of global oil supply flows.

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Adding to bullish oil momentum, the U.S. Energy Information Administration reported on Wednesday a staggering 11.5-million-barrel draw in crude inventories for the week ending June 13. This marks the largest weekly decline in a year, reflecting surging demand and high refinery throughput amid the peak summer fuel season.

European Equities Tumble As Risk-Off Mode Deepens

European equities ended Thursday's session with sharp losses as investors reduced risk exposure amid geopolitical instability and energy concerns.

Italy's FTSE MIB index fell 1.59% to 38,793, touching a six-week low.

The Euro Stoxx 50 dropped 1.38% to 5,197, while France's CAC 40 and Spain's IBEX 35 slid 1.38% and 1.36%, respectively.

Germany's DAX closed 1.17% lower at 23,047.

Investors are bracing for Friday's diplomatic meeting between European Union leaders and Iran in Switzerland.

Monetary policy responses were mixed across Europe on Thursday.

The Swiss National Bank reduced its policy rate by 25 basis points to 0%, marking the first time borrowing costs returned to zero since negative rates ended in late 2022. The rate cut, widely expected by markets, aims to support domestic growth amid a cooling economy.

Norway's central bank also trimmed rates, aligning with a broader shift among smaller European economies facing sluggish momentum.

Meanwhile, the Bank of England kept its main interest rate unchanged at 4.25%. Six of nine Monetary Policy Committee members voted to maintain rates, while three pushed for a 25 basis point cut, reflecting growing pressure to ease financial conditions.

Despite, the broader risk-off mood, futures on gold – as tracked by the SPDR Gold Trust GLD – remained steady at $3,365 per ounce.

In currency markets, the dollar gained slightly, with the U.S. dollar index rising 0.3% to 99.10 levels, extending its weekly rally.

European Indices’ Performance On Thursday

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