TLDR
- The pan-European Stoxx 600 held near record highs, up around 12% year-to-date
- Brent crude rose to $89.45 a barrel after six straight days of gains, driven by Middle East tensions
- U.S. July CPI data due Wednesday could shape Federal Reserve rate decisions, with markets pricing a 50/50 chance of a hike
- Vestas surged 18% after raising its full-year earnings outlook; Balfour Beatty gained 9% on stronger profit forecasts
- North Korea fired a ballistic missile and China planned naval drills near Taiwan, adding to global risk concerns
European stocks held near record levels on Wednesday as rising oil prices and a key U.S. inflation report kept investors cautious.
The pan-European Stoxx 600 was little changed at 660.17 points, still up close to 12% for the year. Germany’s DAX edged up 0.2%, France’s CAC 40 dipped 0.1%, and London’s FTSE 100 was flat.
Brent crude climbed to $89.45 a barrel, extending a six-day winning streak. The gains were driven by ongoing conflict involving Iran and disruptions to shipping in the Persian Gulf.
The conflict, now in its sixth month, showed no signs of ending. U.S. President Donald Trump has repeatedly claimed a deal is close, but talks stalled after he demanded Iran pay direct conflict compensation. Iran responded by warning it would keep the Strait of Hormuz closed until the U.S. meets its terms.
Yemen’s Houthi forces, aligned with Iran, also launched fresh attacks on military supply ships, adding to supply concerns.
Energy and Defence Lead Gains
Europe’s energy sector rose 0.9% on the back of higher oil prices. The aerospace and defence index also gained 0.9%, as investors moved toward companies that tend to benefit from geopolitical tension.
The luxury sector was the worst performer, falling 2%. Healthcare stocks dropped 1.3%.
Inflation Data in Focus
All eyes were on the U.S. July Consumer Price Index report due later Wednesday. Markets are pricing roughly a 50% chance of a Federal Reserve rate hike in September, down from 67% after last week’s jobs report showed an unexpected loss of 23,000 positions.
A softer inflation reading could clear the way for central banks to hold rates steady. A higher reading could raise fears of stagflation, where growth slows but prices remain high.
Final July inflation readings from Germany and Italy confirmed headline consumer price growth at 2.8% year-on-year, providing a stable backdrop ahead of the U.S. data.
Corporate earnings helped drive some individual stocks. Vestas jumped over 18% after the Danish wind turbine maker raised its full-year earnings margin outlook. Balfour Beatty gained 9% after lifting its annual operating profit forecast, citing strong demand for infrastructure in the U.S. and UK. Warship maker TKMS rose 14.6% after raising its outlook for the second time this year. Kingspan climbed 6.5% after announcing it would acquire BMC Manufacturing for an initial payment of 850 million euros. Bilfinger fell over 6% after reporting second-quarter results.
Aggregate Stoxx 600 earnings are tracking growth of nearly 21% year-over-year, led by banking and defence sectors. However, with most European firms having already reported, earnings season is winding down.
Geopolitical risk extended beyond the Middle East. North Korea fired a ballistic missile toward the sea off the Korean Peninsula’s east coast. Taiwan protested China’s planned naval drills near the island.
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