European equities are expected to open mixed on Thursday as investors approach a European Central Bank (ECB) monetary policy meeting and await U.S. August Producer Price Index (PPI) data later in the day.
The ECB is widely projected to raise interest rates by 25 basis points for the second time this year, with pricing fully reflecting this expectation.
Market participants are also monitoring U.S. PPI data for further insight into Federal Reserve policy direction.
Following Friday’s strong U.S. jobs report, the likelihood of a September 16 Federal Reserve rate hike now stands at approximately 60%, though final decisions will largely depend on upcoming PPI and CPI figures.
Geopolitical tensions escalated with renewed clashes between Saudi Arabia and Houthi forces in Yemen, heightening concerns over potential disruptions to oil supply chains.
U.S. President Donald Trump indicated that elevated oil prices stemming from the Iran conflict are unlikely to subside before the November midterm elections.
Rising energy costs are feared to exacerbate inflationary pressures, adding urgency to global central bank rate-setting decisions.
Asian markets generally declined, pressured by soaring oil prices and rising bond yields.
Gold held steady at $1,940 an ounce amid a weaker U.S. dollar, while Brent crude futures hovered near $101 per barrel, marking their highest levels since May.
U.S. stocks extended losses into a third consecutive session overnight, weighed down by surging oil prices and climbing Treasury yields.
Crude oil futures peaked at their highest since May 22 after coordinated U.S. and Iranian strikes on Gulf tankers and Houthi attacks on Saudi oil facilities.
Trump stated the Iran conflict will likely persist beyond November’s elections, emphasizing the U.S. is not pursuing renewed negotiations and suggesting Tehran’s position is unsustainable.
He added that recent U.S. actions in the Strait of Hormuz have disabled nine Iranian tankers, with further military operations possible.
The benchmark 10-year U.S. Treasury yield surged to 4.857%, its highest since November 2023, after the Treasury announced a tripling of long-term bond buybacks to $6 billion, which investors viewed as inadequate.
The Dow Jones Industrial Average declined 0.8% to its lowest closing level in over a month, the S&P 500 slipped 0.5%, and the Nasdaq Composite fell 0.6%.
European stocks touched eleven-month lows on Wednesday, driven by Middle East tensions and hawkish rate expectations that dampened risk appetite.
The STOXX 600 index dropped 1.4%, Germany’s DAX tumbled 1.7%, France’s CAC 40 slumped 1.9%, and the U.K.’s FTSE 100 lost 1.3%.
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