European Stocks Fall as Oil Rises Ahead of Fed Minutes

European shares moved lower on Wednesday as investors took profits following recent gains, with rising crude oil prices and caution ahead of the Federal Reserve’s meeting minutes weighing on market sentiment.

The pan-European STOXX 600 fell 0.4% after reaching a near one-week high in the previous session. Germany’s DAX dropped 0.8%, while France’s CAC 40 declined 0.6%. London’s FTSE 100 slipped 0.4%, and Spain’s IBEX 35 lost 0.6%.

Oil prices edged higher as markets priced in renewed geopolitical risks after Yemen’s Houthi forces launched retaliatory missile and drone attacks targeting Saudi Aramco energy facilities in Saudi Arabia. Higher energy prices added another source of uncertainty for European equities.

Regional markets have already faced significant pressure from a sharp bond sell-off linked to France’s draft budget. European stocks recently touched their lowest levels since June as concerns over France’s growing debt burden and potential political gridlock rattled investors.

French 10-year government bond yields climbed to levels last seen in 2002, while the yield spread over German Bunds widened beyond 140 basis points, putting additional pressure on equity valuations.

Sentiment improved modestly earlier this week after the frontrunner in next year’s French presidential election outlined plans to cut spending by €54 billion and reduce structural deficits. The proposal helped stabilize sovereign debt markets, although investors remain cautious about whether France can implement spending reductions without deepening political instability ahead of the 2027 presidential election.

Attention is now shifting toward the Federal Open Market Committee minutes due later Wednesday. Investors will look for clues about policymakers’ views on interest rates after several Fed officials recently emphasized patience and data dependence. Money markets currently price in about a 78% probability that the Fed will leave rates unchanged at its next meeting.

European investors are also preparing for the third-quarter earnings season, which begins next week. Corporate guidance will be closely watched for signs of how companies are managing elevated energy costs, high borrowing expenses and weaker consumer demand.