European markets close 1% lower as investors focus on Middle East escalation

LONDON — European stocks ended the day lower on Thursday as conflict in the Middle East weighed on regional investor sentiment.

The pan-European Stoxx 600 provisionally closed 1% lower, with almost all sectors and major bourses trading in the red. Construction and materials were down 2%, while oil and gas stocks were the only ones to hold onto gains, ending the day 0.3% higher.

Auto stocks meanwhile slumped 2.17% on reports that the European Union could push through tariffs of up to 45% on Chinese electric vehicle (EV) makers as soon as Friday — a move European carmakers have opposed. Stellantis fell 4%, while Volvo slumped more than 3%. Porsche and Renault also pulled back.

European stocks had closed mixed on Wednesday as investors assessed the ongoing conflict in the Middle East and assessed fresh unemployment data in the euro zone that showed unemployment across the euro zone held steady on the month at a record-low 6.4% in August.

Israel attacked central Beirut early Thursday, killing at least six people, as it pursues Iran-backed armed group Hezbollah. Israel began ground incursions in Lebanon on Tuesday and the strike on Beirut earlier today comes after Iran fired roughly 180 ballistic missiles at Israel earlier this week. Israeli authorities say there were no casualties as a result of the offensive, and that most of the missiles were intercepted. 

In the Asia-Pacific region overnight, Hong Kong stocks plunged as the China stimulus rally, seen after authorities announced a slew of support measures last week, appeared to ease. Markets in mainland China remain closed until Oct. 8.

Meanwhile in the U.S., stocks dipped Thursday after weekly initial jobless claims came in slightly higher than expected. The data comes ahead of the all-important September payrolls report, which is due on Friday.