European shares slide as Brent crude tops $100 a barrel

London's FTSE 100 fell sharply on Wednesday as Brent crude surged past the $100-a-barrel mark for the first time since July, renewing inflation fears across global markets and dampening risk appetite ahead of key U.S. economic data later this week.

The blue-chip index dropped over 1% in afternoon trading to around 10,703, hitting its lowest level in roughly six weeks, according to Reuters. The pan-European STOXX 600 declined 0.4%, with Germany's DAX falling 0.5% and France's CAC 40 slipping 0.6%.reuters+1

Oil Surge Driven by US-Iran Conflict

The rally in crude prices was fueled by escalating hostilities between the United States and Iran. The U.S. military destroyed five Iranian tankers carrying crude in response to attempts to hit a U.S. Navy warship with ballistic missiles, U.S. Central Command said, according to Bloomberg. Iranian-backed Houthi forces in Yemen also launched strikes on several Saudi cities, drawing a key U.S. ally further into the conflict and threatening deeper disruptions to Middle East oil supplies.reuters+2

Brent crude breached $100 for the first time since late July, with the Business Times reporting that a recovery in Chinese oil buying added further upward pressure. Energy stocks were among the few bright spots in London, with BP ↘ 0.38% and Shell ↘ 1.03% rising nearly 2% and 1% respectively on the back of higher crude prices.investments.halifax+1

Inflation Fears and Central Bank Watch

The oil spike has reignited concerns that central banks may need to keep monetary policy tighter for longer. Markets are pricing in a 99.7% probability that the European Central Bank will raise rates by 25 basis points to 2.5% when it meets Thursday, according to Dow Jones reporting carried by Morningstar. Traders are also awaiting U.S. inflation data due later this week, which could shape expectations for the Federal Reserve's next move.morningstar+1

Among individual movers in London, Burberry fell nearly 3% after HSBC ↘ 1.14% downgraded the stock to "hold," citing a challenging macro environment for luxury goods, while utilities including SSE and National Grid ↘ 3.22% gained as investors sought defensive positions. Dan Coatsworth, head of markets at AJ Bell, said: "Utilities were in demand as investors sought to add something stodgy to their portfolio in case of a market correction."investments.halifax