Europe close: Stocks flat as Middle East conflict dampens risk appetite

2nd Oct 2024 15:46

(Sharecast News) - European stock markets finished more or less flat on Wednesday as investors adopted a risk-off approach in light of an escalation of conflict in the Middle East, while oil prices continued to be volatile.

Markets and traders were reacting to renewed fears that the Middle East is on course for full-scale regional conflict, after Iran launched a ballistic missile attack on Israel overnight. Iran launched the barrage hours after Israel began a ground offensive against Hezbollah in Lebanon and warned of further "devastating" attacks if Israel responded.

The pan-European Stoxx 600 finished just 0.05% higher at 521.14, with small gains in London and Paris mostly offset by falls in Frankfurt, Milan and Madrid.

By the close of play in Europe, Brent crude was up another 0.9% at $74.21 a barrel, but had pulled back sharply after rising as much as 3.5% to a high of $76.14 in early afternoon trade. Oil climbed more than 3% on Tuesday. The Middle East accounts for just under a third of global oil production. Iran itself currently exports around 1.7m barrels of oil a day.

Chris Beauchamp, chief market analyst at IG, said risk appetite was "muted" in light of the unfolding events. "Global markets, and indeed the international community, are on tenterhooks as they await an Israeli response to Iran's attacks yesterday. This is unlikely to be a repeat of last time, given the geopolitical implications, and thus today's calm reaction by investors may not last."

Market movers

Oil majors Shell, TotalEnergies and BP gushed higher as oil prices jumped on the back of escalating tensions in the Middle East. Defence firms BAE Systems also gained.

London-listed JD Sports slumped 6% as it held annual guidance after delivering a 2% rise in half-year profit despite what it called a "volatile market".

The negative reason was likely due to negative read-across from Nike, whose shares fell sharply after the sportswear retailer withdrew its annual revenue forecast and posted a 10% drop in first-quarter revenue. Puma finished lower in sympathy, while Adidas pushed higher.