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European shares fall as Middle East conflict fans inflation worries

European shares fell as investors weighed a likely ECB rate hike and ongoing Middle East tensions, with travel, industrial, and banking stocks under pressure, while H&M and Next showed contrasting retail results.

March 26, 2026

Avinash P/Reuters

European shares fall as Middle East conflict fans inflation worries

European Central Bank (ECB) President Christine Lagarde delivers the 2026 Annual Global Risk Lecture in honour of Robert Mundell, at Johns Hopkins University, in Bologna, Italy, March 5, 2026.

Michele Lapini/Reuters

European shares slipped on Thursday as investors grappled with the prospect of an imminent rate hike by the European Central Bank and dimming hopes for a quick end to the Middle East conflict.


The pan-European STOXX 600 .STOXX was down 0.6% at 583.8 points by 0809 GMT, and was on track to break a three-day winning streak.


Policymaker Joachim Nagel told Reuters that the ECB has "an option" to raise interest rates at its April meeting, a day after President Christine Lagarde said that the central bank was prepared to act at any meeting to keep inflation at its 2% target.


Short-term European bond yields, a reflection of interest rate expectations, rose and pressured equities, while interest rate futures reflect a more than 68% chance of a rate hike in April, according to LSEG-compiled data.


Uncertainty about a resolution to the month-long conflict prevails following contradictory remarks by U.S. President ​Donald Trump and Iran.


Elevated crude prices, pressured travel stocks .SXTP that fell 0.9%, while growth concerns hit industrials .SXNP and banks .SX7P - down 0.9% and 1%, respectively.


The spotlight was also on retail stocks following earnings from H&M HMb.ST and Next NXT.L.


The Swedish fashion retailer slipped 4.8% as quarterly sales missed expectations, while Next NXT.L added 5.5% after slightly raising its annual profit guidance.

-Avinash P/Reuters

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