European Stocks Fall As Russia-Ukraine War Escalates

European equities declined for a third consecutive day amid mounting concerns over the escalation of Russia’s war in Ukraine.

Italian shares underperformed, dragged down by losses in the country’s largest lenders.

The Stoxx Europe 600 Index dropped 1% by 11:31 a.m. in London, hitting its lowest level since August 13.

All sectors were in negative territory, with automakers and banks leading the decline. Italian shares underperformed, dragged down by losses in the country’s largest lenders, as reported by Macarena Muñoz and Julien Ponthus for Bloomberg News.

Stocks retreated from session highs after President Vladimir Putin approved an updated nuclear doctrine, which broadens the scenarios in which Russia may deploy atomic weapons.

This decision came shortly after the U.S. granted Ukraine limited authorization to carry out long-range missile strikes on Russian territory.

Ukraine's armed forces subsequently launched their first attack in a Russian border region using ATACMS missiles. As a result, government bonds rose, alongside the yen and other safe-haven assets.

“It’s clearly not good at all,” said Andrea Tueni, head of sales trading at Saxo Banque France.

“The situation could get worse before it improves in the coming weeks, so it’s something investors need to keep in mind.”

Adding to market pressure are concerns over potential tariffs and other policies expected during Donald Trump’s second term as U.S. president. European equities have now posted four consecutive weeks of declines. Additional headwinds include the strengthening U.S. dollar, China’s economic slowdown, and the region’s sluggish economic growth.

“We expect the geopolitical tensions to be short-lived for now,” said Joachim Klement, head of strategy, economics, and ESG at Panmure Liberum.

“Investors shouldn’t overreact to the Kremlin’s change in nuclear policy. Tensions between Russia and the West remain in a holding pattern since Putin has little incentive to escalate further until Donald Trump takes office.”