Europe close: Stocks flat as rising oil prices hit sentiment

(Sharecast News) - European stocks were mostly lower on Tuesday as higher oil prices raised the probability of central banks hiking interest rates to contain inflationary pressures.

The Stoxx 600 pan-European index settled broadly flat, bouncing off its lows of the day as oil prices trimmed earlier gains.

Benchmark indices in London, Italy and Madrid finished moderately lower, Frankfurt was unchanged and Paris settled marginally higher. This was partially offset by a 1.6% drop on Zurich's Swiss Market Index on the back of heavy falls from pharma titan Novartis.

Oil prices rose after Saudi authorities confirmed that operations at several energy facilities were halted following attacks by Yemen's Iranaligned Houthis, which left more than 70 people wounded. The strikes hit sites around Jizan, home to one of Saudi Arabia's largest refineries, adding fresh disruption to regional oil and gas output.

Brent crude was up 0.8% at $97.74 a barrel by the close in Europe, after topping the $99 mark earlier on, as the wider Iran conflict continues to destabilise key infrastructure.

The attacks also deepened concerns over shipping security in the Gulf, where traffic through the Strait of Hormuz has already slowed sharply as tensions continue to escalate between the US and Iran over the vital waterway.

"Brent crude oil prices are on the cusp of hitting $100 a barrel, suggesting that central banks may keep interest rates higher for longer or consider further rate rises if inflationary pressures intensify. This has major implications for personal finances, corporate profits and financial markets," said Dan Coatsworth, head of markets at AJ Bell.

"The CME FedWatch tool shows a 60.5% probability of a US rate hike at the Fed's meeting next week, while data from LSEG suggests we could see a UK rate hike in November."

In economic data, Germany's trade surplus widened in July to �21.3bn from a revised �15.4bn in June. However, the surplus also came in ahead of the �16.8bn recorded a year earlier, helped by a sharper fall in imports than exports.

Seasonally adjusted exports slipped 0.8% on the month to �138.2bn, though they were still 6.1% higher yearonyear, while imports dropped 5.7% to �116.9bn, but remained 3% above July 2025 levels.

In equity news, shares in Novartis tanked 11%, with the stock posting its worst daily performance on record, after disappointing results from a clinical trial of its muscle-wasting disease treatment. The news adds further pressure to the Swiss pharma giant's pipeline following another clinical setback announced the day before.

London-listed tech services provider Computacenter fell 8% despite the firm lifting full-year guidance on the back of a surge in first-half profits driven by a booming North American order book.

Others in the European tech sector were also under pressure as the recent AI and chip-related rallies ran out of steam. Softcat, Infineon Technologies and BE Semiconductor Industries were among the worst performers on the Stoxx 600.