An underwhelming earnings report from Hennes & Mauritz AB has intensified concerns about inflation pressures confronting European retailers. The Stoxx 600 Retail Index has dropped 5.2% this year, underperforming the 7.5% rally in the wider benchmark, as higher oil prices and hawkish central banks drain consumer confidence.

The protracted Middle East conflict is darkening the outlook. Brent crude above $100 is pushing up diesel and natural gas costs, prompting warnings about a 2022-style energy shock this winter. Policymakers’ efforts to curb inflation also mean higher rates for mortgages, auto loans and credit cards. “I have zero allocation to European consumer-related sectors,” said Roland Kaloyan of Societe Generale SA.

A Bank of America Corp. survey showed a net 50% of fund managers are underweight European retailers. Analysts had tipped a 13% rebound in consumer discretionary profits this year, but conviction is cracking. Kate Calvert of Investec Bank Plc said winter will be crucial, while Emmanuel Cau of Barclays Plc said much rests on oil. “If oil goes down because there’s a deal or de-escalation, there’s a case for some of the stocks to bounce because positioning is very, very bearish.”