European markets set to slump at the open as Iran war intensifies

• Israel struck Iran's South Pars gas field, prompting retaliatory attacks on Qatar's LNG terminal; President Trump threatened to 'massively blow up' South Pars if Iran continues targeting Qatari energy facilities
• European Central Bank, Bank of England, Riksbank and Swiss National Bank are all widely expected to hold rates steady as they assess the war's impact on growth and inflation
• U.S. markets dropped to fresh 2026 lows amid growing fears that the Iran conflict could push the economy toward stagflation - a period of lower growth combined with higher inflation

European Markets Face Sharp Decline Amid Iran Conflict Escalation

European stocks are poised for significant losses at Thursday's open as the Iran conflict intensifies following attacks on critical energy infrastructure. The UK's index is expected to open 0.9% lower, Germany's down 1.6%, France's down 1%, and Italy's down 1.2%, according to IG data.

Key Developments:

The conflict escalated sharply Wednesday when Israel struck Iran's South Pars gas field, prompting Tehran to retaliate by launching attacks on Qatar's liquefied natural gas terminal. U.S. President Donald Trump threatened to "massively blow up the entirety of the South Pars Gas Field" if Iran continues targeting Qatari energy facilities. Additional strikes occurred overnight following these developments.

Central Bank Action:

Market attention is also focused on Thursday's monetary policy decisions from four major central banks: the European Central Bank, Bank of England, Riksbank, and Swiss National Bank. All are widely expected to hold rates steady as policymakers assess the conflict's impact on growth and inflation outlooks.

Economic Concerns:

U.S. markets declined overnight, with indices hitting fresh 2026 lows amid mounting fears of stagflation—a period of lower growth combined with higher inflation. The Federal Reserve's recent indication of greater inflation expectations has intensified these concerns, particularly given the potential energy supply disruptions from the Middle East conflict.

Market Impact:

Asian markets dipped Thursday, tracking Wall Street losses. The geopolitical uncertainty and energy infrastructure attacks pose significant risks to global supply chains and inflation trajectories, contributing to the risk-off sentiment across global markets.