EU banks face biggest drop since April tariff shock as Middle East conflict sparks fears

Shares in European banks set for their biggest daily drop since April 2025 tariff shock after the U.S.-Iran conflict and the closure of the Strait of Hormuz roiled global markets

The STOXX 600 banks index .SX7P falls 3.8% and is among the worst performers of sectoral indices on the pan-European STOXX 600 .STOXX index

*"With the situation in Iran escalating, investors are nervous, and that uncertainty hits banks pretty quickly and the sector is highly cyclical, so when people worry about the broader economy or the risk of another inflation shock, bank shares tend to feel it almost immediately," Johann Scholtz from Morningstar says

Scholtz says there's a real concern that prolonged tension could squeeze banks' customers and slow activity, and that feeds straight into the outlook for lenders

"What we're seeing now is investors pulling back from anything seen as economically sensitive and parking money in more defensive sectors, which naturally puts more pressure on EU banks," Scholtz adds

Commerzbank CBKG.DE, UBS UBSG.S, Julius Baer BAER.S, Societe Generale SOGN.PA and BNP Paribas BNPP.PA are down between 3.5% and 4%

Unicredit CRDI.MI, ING Groep INGA.AS, BBVA BBVA.MC, Banco de Sabadell SABE.MC and Deutsche Pfandbriefbank PBBG.DE fall between 3.5% and 4%

BPER Banca EMII.MI, HSBC HSBA.L, Standard Chartered STAN.L, Raiffeisen Bank RBIV.VI and Barclays BARC.L are down between 4.1% and 6.1%