European equities opened mixed on Monday after several U.S. allies—including Japan, Germany, and Australia—explicitly declined President Donald Trump’s call to help reopen the Strait of Hormuz off southern Iran. The rejection triggered another sharp spike in global oil prices, with Brent crude breaching the $120-per-barrel mark, intensifying market fears of resurgent inflation and a potential shift in central bank policy.
As of 08:03 GMT, the pan-European STOXX 600 index edged down 0.1%, Germany’s DAX fell 0.3%, France’s CAC 40 was flat, and the UK’s FTSE 100 rose modestly by 0.1%. Investors remained cautious ahead of a “super central bank week,” with the Federal Reserve, European Central Bank, Bank of Japan, and Bank of England all set to announce interest rate decisions.
Multiple Countries Decline Participation as Strait Remains Blocked
During early European trading, global benchmark Brent crude futures surged more than 5% to $122 per barrel before retreating to around $118. This followed clear statements from Germany, Australia, and Japan that they would not join U.S.-led military efforts to lift the blockade on the Strait of Hormuz.
German Foreign Minister Annalena Baerbock stated unequivocally, “We will not be part of this conflict,” emphasizing that security can only be assured once the underlying military dispute is “fundamentally resolved.” Australian Transport Minister Catherine King also confirmed her country would not deploy naval vessels to escort ships through the strait. In Japan, Takayuki Kobayashi, chairman of the Liberal Democratic Party’s Policy Research Council, noted that any decision to send warships would face an “extremely high threshold.”
France remains the only European nation taking action in the Middle East, though President Emmanuel Macron explicitly ruled out sending naval escorts, stressing that French operations are “purely defensive.”
Supply Crisis Deepens Despite Record Strategic Reserve Release
The Strait of Hormuz handles roughly one-fifth of global seaborne oil shipments. Since late February, when the U.S. and Israel jointly launched strikes against Iran, vessel traffic through the strait has plummeted by about 97%, effectively bringing it to a standstill. According to Lloyd’s List Intelligence, only 77 ships have transited the strait since March—compared to 1,229 during the same period in 2025.
On Thursday, the International Energy Agency (IEA) announced its member countries would release 400 million barrels of strategic petroleum reserves—the largest coordinated drawdown in history—yet this failed to calm market panic. Goldman Sachs warned that if the disruption lasts 60 days, Brent could hit $150 per barrel; even under a base-case scenario of 21 days of severely reduced flow, prices could exceed $100.
Inflation Fears Mount as Policy Expectations Shift
The oil price surge has reignited deep concerns over renewed global inflationary pressures. Deutsche Bank highlighted energy-driven price shocks as a key risk to its 2026 economic outlook, potentially forcing central banks to reconsider their rate-cut trajectories.
Markets widely expect the ECB to hold rates steady at Thursday’s meeting, while the Fed is also anticipated to remain on hold at its Wednesday decision. However, updated dot plots may signal just one rate cut in 2026—fewer than previously expected. At the Bank of England, internal divisions over further easing are widening, but deteriorating Middle East tensions make a rate hold highly likely.
Analysts warn that if the Hormuz blockade persists into the second quarter, inflation data in both Europe and the U.S. will face direct upward pressure, derailing anticipated rate-cut schedules and weighing heavily on risk asset valuations. The cautious tone in European equities reflects investors’ difficult balancing act between escalating geopolitical risks and uncertain monetary policy paths.
