ISTANBUL

European stock markets closed sharply lower on Thursday after the European Central Bank (ECB) and the Bank of England (BoE) left interest rates unchanged, while heightened volatility in oil prices and mounting concerns over Middle East supply disruptions weighed on investor sentiment.

At the close, the benchmark Stoxx Europe 600 index fell 2.39% to 583.64 points.

Britain’s FTSE 100 lost 2.35% to 10,063.5 points, Italy’s FTSE MIB 30 dropped 2.32% to 43,701.38.

France’s CAC 40 declined 2.03% to 7,807.87, and Germany’s DAX 40 slid 2.82% to 22,839.56 points.

The euro/dollar parity rose 0.93% to 1.1557 as of 1815GMT.

Investor sentiment remained under pressure as escalating tensions in the Middle East and attacks on energy infrastructure fueled fears of deeper oil and gas supply disruptions.

Brent crude surged as high as $119.13 per barrel during the session before easing to below $100, underscoring the scale of market volatility and reinforcing concerns that higher energy costs could intensify inflationary pressures across Europe.

Markets were also digesting Thursday’s ECB and BoE decisions after the US Federal Reserve kept rates unchanged a day earlier, as policymakers across major economies grappled with the inflation risks stemming from the energy shock.

The BoE kept its benchmark interest rate at 3.75%, citing mounting inflation risks tied to the recent jump in energy prices. Governor Andrew Bailey said the conflict in the Middle East had pushed up global energy prices and that the impact was already visible in fuel costs, warning that if the trend persists, it could feed through to higher household energy bills later this year.

The ECB also left its three key interest rates unchanged. ECB President Christine Lagarde said the war in the Middle East had made the outlook “significantly more uncertain,” creating upside risks for inflation and downside risks for economic growth.

She added that the medium-term effects of the conflict would depend on its intensity and duration, as well as on how higher energy prices feed through to consumer prices and the broader economy. The ECB also raised its inflation forecasts on the back of higher energy costs.