European stock markets fell on Tuesday, snapping a five-month winning streak. Rising oil prices fueled inflation worries and pushed global bond yields to levels not seen in nearly two decades. The Stoxx Europe 600 index closed down 0.6%, with travel, leisure, and technology sectors leading the declines, while energy and personal care stocks showed relative resilience.

According to Lombard Odier Investment Managers macro head Florian Ielpo, the recent yield surge is increasingly reflecting financing pressures rather than stronger growth prospects, a combination that tends to be unfavorable for equities.

After a robust corporate earnings season, investors are now searching for the next market-moving catalyst, which has left the European benchmark index trading sideways in recent weeks.

Data released on Tuesday showed that eurozone inflation accelerated to its highest level in nearly three years, reinforcing expectations that the European Central Bank will raise interest rates next week. However, Panmure Liberum strategist Joachim Klement suggested that European stocks should be relatively insulated from bond market volatility, given that the overall fiscal position of European nations is notably better than that of the US or Japan. He added that the more pressing concern for European markets in September is the inflation outlook and how the ECB, along with other central banks, will respond.