European Shares Seen Lower As US, Iran Trade Threats To Destroy Infrastructure

(RTTNews) - European stocks may slump at open on Monday as investors watch the latest developments in the Middle East war and assess the potential impact of elevated energy prices on inflation and growth.

Investors remain wary of an escalation in the conflict after U.S. President Donald Trump threatened to "hit and obliterate" Iran's power plants if Tehran does not reopen the Strait of Hormuz— a vital artery for global energy flows — within 48 hours.

Tehran warned of retaliation, threatening to close the strait and target energy infrastructure and desalination facilities in the Gulf if the U.S. carries out its ultimatum.

Any attacks on the country's power plants would "immediately" be met with retaliatory strikes on energy and oil infrastructure across the region, Iran's Parliament speaker Mohammad Bagher Ghalibaf said.

Ghalibaf also said entities that finance the U.S. military budget are "legitimate targets" for the country, alongside military bases.

As the Iran war pushes global energy prices higher, it is feared that cost-driven inflation may prompt major global central banks to maintain a hawkish stance in the coming months.

A slew of major central banks signaled last week that they were prepared to raise interest rates to combat inflation.

Federal Reserve Chair Jerome Powell's tone and the guidance on March 18 suggested that a rate hike is not off the table, but it's unlikely for now.

Asian markets tumbled, with benchmark indexes in Hong Kong, Japan and South Korera plunging 3-6 percent as the war between the United States and Iran's regime entered an unprecedented phase, escalating fears of a wider regional conflict.

Iran's Natanz nuclear enrichment facility was hit in an airstrike Saturday. Two Iranian strikes on towns near Israel's main nuclear research center injured more than 100 people.

The dollar held gains from the previous session and ten-year U.S. Treasury yields hovered near an eight-month high while gold prices slumped 2.5 percent below $4,400 an ounce on inflation and rate-hike fears.

Brent crude prices were up more than 1 percent near $108 a barrel in Asian trade while WTI crude futures were up 0.6 percent at $99 a barrel.

U.S. stocks fell for a third straight session on Friday as bond yields surged on inflation fears following new attacks on energy infrastructure in the Middle East.

Adding to investor anxiety, CBS reported that Pentagon officials have drawn up detailed preparations for deploying U.S. ground troops into Iran.

Axios reported that the Trump administration is mulling a forced takeover of Iran's Kharg Island, a key oil-export site, to put pressure on Iran to reopen the Strait of Hormuz.

The Wall Street Journal reported that the Pentagon is deploying three more warships and thousands of additional Marines to the Middle East.

Trump suggested in an interview with MS Now's Stephanie Ruhle that the U.S. would continue to attack Iran until they can "never rebuild." Trump later told reporters he is not interested in a ceasefire with Iran.

The tech-heavy Nasdaq Composite plummeted 2 percent, the S&P 500 slumped 1.5 percent and the Dow gave up 1 percent to reach their lowest closing levels in over six months.

European stocks ended deep in the red on Friday, giving up early gains on concerns that major central banks will soon hike interest rates.

The pan European Stoxx 600 fell 1.8 percent. The German DAX tumbled 2 percent, France's CAC 40 lost 1.8 percent and the U.K.'s FTSE 100 shed 1.4 percent.