European markets stabilise after Korean stocks suffer biggest one-day drop since 2008

European markets have rebounded after sharp falls this week as Israel and the US continued their attacks on Iran. 

The FTSE 100 is trading up 60 points, or 0.56 per cent, after sinking into the red at one point this morning. Other European indices, including across Germany and France, have also stabilised.  

There were worrying signs that the market rout could spread across global markets again today, as Asian equities sank overnight amid fears of a drawn-out war in the Middle East.  

The chaos in global stock markets showed no sign of letting up this morning as Asian equities sank on fears of a drawn-out war in the Middle East.

South Korean shares closed 12 per cent lower, marking their biggest daily drop since 2008, while European indices remained cautious. 

Trading was halted on Korea’s benchmark Kospi index after sharp declines triggered circuit breakers for the first time since August 2024.

The escalating conflict across the region is pushing up oil and gas prices, which has a significant impact on net oil importing countries such as South Korea, which relies almost entirely on imports for its energy.

Oil prices have soared to above $80 a barrel after Iran disrupted shipping in the Strait of Hormuz – a key shipping route for crude tankers– raising concerns over supply and what it means for inflation.

The impact on European stocks has been more muted today, after sharp falls on Tuesday, even as brent crude rose 0.97 per cent to around $82 a barrel. 

The FTSE 100 made a small recovery at the open, having closed 2.75 per cent lower yesterday, its biggest one-day selloff since Donald Trump announced his ‘Liberation Day’ tariffs last April.

It is currently trading 58 points up at 10,542.

Natural gas prices have rocketed over 100 per cent this week, and while below the levels seen in the 2022 energy crisis, analysts fear a sharp rise in bills. Stifel analysts forecast the energy price cap may hit £2,500 by the summer.

The threat of a fresh bout of inflation has dented hopes of further interest rate cuts, which is also weighing on markets. 

Financial markets now put the chances of a cut at the Bank of England’s March meeting at just 30 per cent – down from 80 per cent last week.

The FTSE was led by a broad basket of companies, including miners Antofogasta and Anglo American, Informa, Entain and Intertek. 

Richard Hunter, head of markets at Interactive Investor said: ‘There were signs of a floor having been reached in the UK, at least temporarily, where after a couple of bruising sessions the FTSE100 limped to a marginally positive open.

‘It remains to be seen whether this tentative climb is the beginning of a recovery having priced in the implications of the conflict, or whether it is simply a relief rally buoyed by some investors choosing to buy on the dip.

‘In any event, the primary index remains relatively unscathed, with its 5.7% gain in the year to date lower than previous highs but showing some signs of the defensive resilience which has been an investment attraction to global investors in the recent past.’

Meanwhile, precious metals made gains after sharp falls on Tuesday as a stronger US dollar, rising inflation concerns and liquidity demand curbed demand for the haven assets.

Gold rose over 2 per cent to $5,190 while silver jumped 4 per cent to $84.90.