Adding to the geopolitical anxiety was the fear that the European Central Bank and the Bank of England might signal higher interest rates, on a day when mixed results from US Big Tech offered limited solace to investors.
The primary catalyst for the session was the price of Brent crude, which soared more than 6% to 125 dollars, a four-year peak, following reports that the United States is weighing a new offensive against Iran.
According to various media outlets, President Donald Trump is set to receive a briefing today on new military action options at a time when peace talks appear to have stalled. Separately, a source consulted by Reuters noted that Trump discussed with oil companies how to mitigate the impact of a potential US blockade of Iranian ports that could last for months, while the United States renewed its calls for other nations to help keep the Strait of Hormuz open.
This backdrop of escalating conflict and inflationary pressure fuels fears that the ECB and the BoE may use their Thursday meetings to warn of potential hikes in borrowing costs to rein in prices.
On Wednesday, the Federal Reserve (Fed) left rates unchanged in its most closely contested decision since 1992: three regional presidents of the US central bank opposed maintaining language that pointed to an 'easing bias', arguing that such wording was no longer appropriate given persistent inflation and the massive uncertainty over oil prices stemming from the US-Iran conflict.
For his part, outgoing Chairman Jerome Powell confirmed he will remain as a governor of the institution to defend its independence while Trump's proposed successor, Kevin Warsh -- known for his dovish stance -- moves toward confirmation in the post.
In this context, quarterly results from Big Tech provided little relief. Earnings from Alphabet, Google's parent company, beat forecasts, sending its shares up 7% in after-hours trading, and both Microsoft and Amazon also posted solid figures, fueling expectations ahead of Apple's results, due Thursday after European markets close.
However, Meta Platforms disappointed by substantially raising its annual capital expenditure forecast to invest additional billions in artificial intelligence infrastructure, triggering a 7% drop in its shares and diluting much of the optimism generated by the rest of the sector.
Analysts at Bankinter indicated in their daily note that 'the early tone is one of caution in the face of a fresh spike in oil prices (+5% to 124.4$/bbl) due to scant evidence of progress in reopening the Strait of Hormuz'.
At 0702 GMT on Thursday, Santander was down 2.43%, BBVA fell 0.60%, Caixabank shed 2.20%, Sabadell dropped 1.40%, Bankinter lost 1.40%, and Unicaja Banco was down 1.61%.
Among non-financial heavyweights, Telefonica gained 0.45%, Inditex shed 1.15%, Iberdrola edged up 0.03%, Cellnex fell 1.75%, and the oil major Repsol rose 1.00%.
The FTSE Eurofirst 300 index of leading European shares was down 0.67%.
(Reporting by Tomas Cobos; editing by Benjamin Mejias Valencia)
