By Joe Stonor
European blue-chip indexes entered correction territory in early trade as the escalating conflict in the Middle East spurred a widespread pullback from risk.
Premier stock baskets in London, Paris and Frankfurt opened lower and are now more than 10% below all-time highs hit earlier this year. The Europe-wide Stoxx 600 index was more than 11% below its prewar February high.
The U.K.'s FTSE 100 was down 2.3% in early trade Monday and is now more than 11% lower than its all-time high on Feb. 27, the last trading day before the U.S. and Israel launched massive strikes against Iran.
Germany's DAX is close to 14% below its January peak, while France's CAC 40 is just shy of 13% lower than its February high. Both indexes fell more than 2% Monday.
Indexes in Spain and Belgium also entered correction territory Monday.
"Each day that the war goes [on] does more damage to the global economy and drives inflation higher, with recession chances rising by the hour," IG chief analyst Chris Beauchamp said.
Energy-sensitive industrial stocks led the continent's fallers as oil and gas prices rose further. President Trump's warning Saturday that the U.S. would attack Iranian power facilities if a 48-hour deadline to allow ship traffic though the Strait of Hormuz wasn't met prompted Tehran to threaten energy resources across the Gulf.
British industrial giant Rolls-Royce, which makes fighter jet engines, tumbled 5.2% in London. Rheinmetall was 3% lower in Frankfurt.
Meanwhile, a gauge of European real estate stocks was 3.4% lower as investors bet an inflation shock would lead to higher-for-longer interest rates on the continent.
Investors are recoiling from stocks and moving to traditionally less-risky assets as they become more nervous around the implications of the ongoing Middle East conflict, analysts at Goldman Sachs said. The investment bank's in-house gauge of risk appetite is close to zero, they said.
The conflict-induced falls in European equities follow what was a bumper period for markets at the start of the year. Stocks on the continent soared over the past 18 months on hopes of economic recovery and as investors sought to shift away from over-exposure to the U.S.
Though the DAX and CAC 40 are now down over the past year, the U.K.'s FTSE 100 remains up over the last 12 months.
Write to Joe Stonor at josephmichael.stonor@wsj.com
(END) Dow Jones Newswires
March 23, 2026 06:52 ET (10:52 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
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