European stocks are set for a mixed open Thursday as investors brace for a pivotal European Central Bank policy decision and key U.S. inflation data.
The ECB is widely expected to raise interest rates by 25 basis points, marking the second hike of 2026, with the move already fully priced into markets.
Ongoing Middle East conflict continues to weigh heavily on investor sentiment, driving energy prices higher and complicating the inflation outlook for central banks globally.
Traders are also keeping a close eye on the U.S. August Producer Price Index release, which could shape expectations for Federal Reserve policy in the weeks ahead.
Following last Friday’s strong August U.S. jobs report, markets are now pricing in roughly a 60 percent probability of a Federal Reserve rate hike on September 16.
The Fed’s decision is seen as largely dependent on both the PPI figure and the Consumer Price Index data due Friday, making this a critical two-day window for markets.
On the geopolitical front, escalating fighting between Saudi Arabia and Yemen’s Houthis has intensified fears of further disruptions to global energy supplies.
U.S. President Donald Trump said oil prices that spiked because of the Iran war are unlikely to come down until after the U.S. midterm elections.
Trump also said that recent U.S. strikes in the Strait of Hormuz have incapacitated nine Iranian tankers and that more attacks could follow, adding further uncertainty to energy markets.
The President added that the U.S. is not looking to restart negotiations with Tehran and that the country “can’t hold out any longer,” suggesting the conflict could persist well into the election cycle.
Crude oil futures reached their highest level since May 22 after the U.S. and Iran attacked tankers in the Gulf region and Yemen’s Houthis hit oil facilities in Saudi Arabia.
Gold edged slightly higher to $4,410 an ounce on a softer dollar, while Brent crude futures hovered around $101 a barrel, near their strongest level since May.
The yield on the benchmark 10-year Treasury note surged to 4.857 percent, the highest since November 2023, after the Treasury Department said it would triple the size of its individual long-dated Treasury buyback operations to $6 billion.
Investors deemed that expansion insufficient, driving bond yields sharply higher and adding pressure to equity markets already rattled by rising oil prices.
Wall Street closed lower for a third straight session, with the Dow dipping 0.8 percent to its lowest closing level in over a month, while the S&P 500 fell half a percent and the Nasdaq Composite lost 0.6 percent.
European equities fared no better Wednesday, with the pan-European STOXX 600 falling 1.4 percent to hit over one-month lows amid hawkish rate bets and Middle East tensions.
Germany’s DAX tumbled 1.7 percent, France’s CAC 40 slumped 1.9 percent, and the U.K.’s FTSE 100 declined 1.3 percent as risk appetite deteriorated sharply across the region.
Asian markets also traded broadly lower, weighed down by the dual pressures of surging oil prices and elevated bond yields dampening the broader global growth outlook.
Rising oil prices are stoking fears that inflation will prove more stubborn than anticipated, putting additional pressure on central banks worldwide to maintain or tighten their rate-hiking cycles.
With the ECB decision, U.S. PPI, and Friday’s CPI all arriving in quick succession, this week represents one of the most consequential periods for global markets so far in 2026.
