p{1bwkih84cdg{x}id388603_media_dl_1.png Bloomberg

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(Bloomberg) — European stocks headed for the biggest two-day drop since April as conflict in the Middle East intensified and pushed up energy prices.

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The Stoxx Europe 600 Index extended losses to 2.9% as of 9:45 a.m. in London. The retreat was broad, with all industries posting declines. The blue-chip Euro Stoxx 50 index fell 3.1%. 

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Banks were among the biggest laggards, with HSBC Holdings Plc, Banco Santander SA and UniCredit SpA all falling more than 3%. JPMorgan Chase & Co. analysts said the sector’s selloff may have gone too far, as the Middle East escalation has had only a limited direct impact on global investment banks’ earnings so far. 

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The energy sector outperformed as oil prices continued to climb and European natural gas prices surged as much as 34% following the shutdown of a Qatari LNG export plant. Equinor ASA and BP Plc were among the biggest gainers. 

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Europe’s benchmark index retreated as US President Donald Trump pledged to do “whatever it takes” and gave no timeline for the end of the war in Iran. The focus remains on the potential impact on the Strait of Hormuz, through which about a fifth of the world’s oil and liquefied natural gas typically flows, raising concerns about higher energy prices.

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Mathieu Racheter, head of equity strategy at Julius Baer, said investors are no longer pricing just geopolitical noise but the probability of a supply shock to oil and gas. 

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“The risk emerges if oil were to move decisively above $100 per barrel and stay there,” Racheter said. “At that point, the conversation would shift from incremental inflation to stagflation risk – slower growth combined with renewed price pressure.”

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Elsewhere, Zurich Insurance Group AG fell 6.3% after starting a $5 billion capital raise to finance bid for insurer Beazley Plc.

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In earnings news, Beiersdorf AG dropped 17% after the German owner of the Nivea brand posted disappointing guidance for the year. VAT Group AG shares retreated 4.6% after the chip-equipment maker’s first-quarter sales guidance missed estimates.

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