European equities plunged in their sharpest two-day decline since April as escalating Middle East tensions drove energy costs higher. The Stoxx Europe 600 Index fell 2% at 8:30 a.m. London time, marking the index's worst performance since April 11th.

The sell-off was pervasive, impacting all sectors with insurance stocks bearing the brunt; Zurich Insurance Group AG dropped 5% after initiating a $5 billion capital raise to fund its acquisition of Beazley Plc. Beiersdorf AG shares tumbled 12% following its disappointing annual guidance, while chip-equipment maker VAT Group AG fell 2.9% after missing sales forecasts. Oil prices rose 0.5% as Goldman Sachs' European oil basket outperformed, reflecting market bets on sustained energy volatility. US President Trump offered no end date for the Iran conflict, heightening concerns about potential disruptions to the critical Strait of Hormuz shipping lane, which transports roughly a fifth of global oil and LNG. Julius Baer's Mathieu Racheter warned investors are now pricing in a higher probability of oil supply shocks, stressing such an event would tighten financial conditions and compress corporate margins, reigniting stagflation fears. The market retreat underscores how geopolitical risk is rapidly shifting from a background factor to a core driver of European equity valuations.