Oil Prices Surge as US-Iran Peace Talks Collapse

European equity markets declined on Thursday, with the pan-European STOXX 600 extending a losing streak to seven sessions. The downturn followed the collapse of peace talks between the United States and Iran regarding a six-month conflict in the Middle East, which triggered a surge in oil prices and renewed inflation fears.

Donald Trump drove the geopolitical tension by warning of economic consequences for any country providing "any type of lifeline to Iran" and asserting that the U.S. maintains "complete control" of the Strait of Hormuz. Brent crude futures rose over 2.7% to more than $94 a barrel in response. Iran's Foreign Minister Abbas Araghchi countered that the U.S. approach of doubling down on failed policies would only bring "further defeat".

Market pressure was compounded by German producer price inflation, which rose 3% annually in July, exceeding forecasts. While the U.S. Treasury intervened in the bond market to increase liquidity for long-term debt, corporate volatility persisted. British retailer JD Sports saw shares plunge over 13% after cutting its profit outlook, while Danish firm Novonesis shares rose following strong second-quarter results.