European equities are set to open sharply lower following coordinated U.S. and Israeli military strikes on Iran, triggering a global risk-off rally. Energy and defense stocks are under pressure, with crude oil surging above $98 a barrel and volatility indexes spiking.
- European indices projected to open 2.5% lower amid U.S.-Israel strikes on Iran
- Crude oil futures (CL=F) surge past $98 per barrel, up 7% on supply fears
- XLE energy ETF declines 5.2% in pre-market trading
- CBOE VIX (^VIX) jumps to 34.6, its highest since late 2023
- Defense stocks see gains, but broader market sentiment remains negative
- Risk-off sentiment driving capital outflows from European equities
European markets are poised for a sharp decline at the open, with major indices like the DAX and FTSE 100 projected to fall more than 2.5% as traders digest the implications of U.S. and Israeli strikes on Iranian military sites. The escalation in the Middle East has reignited fears over energy supply disruptions, particularly in the Strait of Hormuz, a critical maritime chokepoint for global crude exports. The conflict's spillover risk has driven benchmark crude oil futures (CL=F) to trade above $98 per barrel, a 7% increase from the previous close, reflecting heightened concerns over potential supply shortfalls. Energy equities, including ExxonMobil (XLE) and BP, are facing heavy selling, with XLE down 5.2% in pre-market trading. The defense sector is also seeing gains on increased geopolitical risk, though broader market sentiment remains bearish. Volatility has surged, with the CBOE VIX index (^VIX) jumping to 34.6, its highest level since late 2023. This marks a 40% increase from the prior session and signals rising investor anxiety. The spike in market uncertainty is amplifying pressure across European financials, technology, and industrials, sectors highly sensitive to global trade and risk appetite. The combination of geopolitical tension, energy volatility, and flight-to-safety flows is likely to sustain downward pressure on European equities throughout the session, with investors awaiting further developments from regional powers and international diplomacy efforts.