Conflict in the Middle East and high energy costs push down European stock markets: rising yields and tightening fears

The conflict in the Middle East continues to hold the financial markets hostage as they move in uncertainty. In Europe, the stock exchanges recorded a new decline, more contained compared to Monday and Tuesday, but still a sign that the higher energy costs are fueling inflationary expectations. Milano lost 1.61% just like Frankfurt, while Paris dropped 1.49% and London fell 1.45%. Yet, the day did not start badly with the rebound of Asian markets. An enthusiasm that lasted little, at least in Europe, and even less in the United States with Wall Street being heavy from the start,

"Europe's energy sources are more diversified compared to the beginning of Russia's war in Ukraine, while inflation was close to the ECB's target of 1.9% in February 2026," summarizes a report by Scope rating. In this context, it is unlikely that gas prices will return to the previous peak levels of 2022, when they averaged 133 euros. However, the persistence of high gas prices, now at 50 euros per megawatt hour, and oil heading towards 85 dollars per barrel with Brent, "could still - according to analysts - have macroeconomic implications." One of which is the increase in consumer goods and services prices along with the decline in purchasing power.

The latest sell-off in the markets is also a consequence of this. And among investors, considering the inflationary fears, the conviction of a tightening of monetary policy by central banks is gaining ground. The first alert came from the rise in government bond yields with the 10-year BTP rising by 13 basis points, almost to 3.56%. The French OAT was no different at 3.46% (+12 basis points) as well as the German bund at 2.83% (+9 basis points).