European shares rise as Saudi pipeline repair eases oil fears

European stock markets climbed on Thursday as crude oil prices retreated for a second session, offering relief to investors rattled by a week of supply disruptions following drone strikes on Saudi Arabia's main export pipeline.

The pan-European STOXX 600 rose 0.5% in early trading, according to Reuters, with travel stocks among the top gainers as lower energy costs eased pressure on the sector. The FTSE 100 also moved higher, gaining roughly 0.4% to 0.6% as oil's retreat bolstered sentiment across London-listed shares. The rally came as a global bond selloff paused following the U.S. Federal Reserve's widely anticipated interest rate hike on Wednesday.reuters+1

Pipeline Repair Drives Oil Retreat

Oil prices, which surged past $108 per barrel earlier this week, pulled back after Bloomberg reported that Saudi Aramco is working to bypass a damaged section of the East-West pipeline and restore roughly half its capacity within days. The pipeline, which carries up to 7 million barrels a day to the Red Sea port of Yanbu, was knocked offline on September 10-11 by drone strikes launched from Iraqi territory amid the wider U.S.-Israeli conflict with Iran. Full restoration is expected to take four to six weeks.worldtribune+3

Despite the partial recovery, oil remained above $100 per barrel, and analysts at CNBC cautioned prices are unlikely to fall below that threshold soon given the precarious state of Middle Eastern supply routes. European energy stocks dipped 0.2% even as the broader market rose, with Reuters reporting that Saudi Arabia was offering extra crude cargoes through Oman to offset the disruption.cnbc+1

Europe's Energy Squeeze Persists

The temporary reprieve in oil prices has done little to ease Europe's broader energy crisis. A Reuters analysis published Thursday found that EU gas storage levels stand at just 69% of capacity, well below the 85% five-year average for mid-September, as the conflict in the Middle East has deterred restocking efforts. Petrol prices across the EU are 24% higher than a year ago, diesel is up 38%, and jet fuel costs have more than doubled.marketscreener

The Bank of England was expected to hold interest rates at 3.75% later Thursday, while the European Central Bank raised rates last week and warned further increases may be necessary if energy-driven inflation persists. Morgan Stanley ↘ 0.80% analysts warned that Europe's gas benchmark, already up 150% year-on-year, could reach EUR 100 per megawatt hour depending on winter weather.bloomberg+2

"Each month that Europe delays restocking raises pressure on prices as peak winter usage approaches," said UniCredit strategist Jonathan Schroer.marketscreener