European stock markets, along with gold and silver prices, experienced a sharp collective decline. The escalation of tensions involving Iran triggered a significant drop in major European stock indices. At the time of reporting, Germany's DAX 30 index and the UK's FTSE 100 index both fell over 2%, while France's CAC 40 index dropped 1.78%. Additionally, key stock indices in Spain, Sweden, Austria, and Italy all registered declines exceeding 2%.

Simultaneously, surging oil prices fueled market concerns about inflation, leading to a sharp reduction in expectations for further interest rate cuts by central banks. This prompted a substantial sell-off in gold and silver. Spot gold fell below $4,700 per ounce, with an intraday loss nearing 3%. Spot silver dropped over 6%, currently trading at $70.71 per ounce.

Regarding the latest developments with Iran, a spokesperson for the Central Command of Iran's Armed Forces warned on the 19th that if energy facilities are attacked again, Iran will launch further assaults on the energy infrastructure of the United States, Israel, and their allies, aiming for complete destruction. The spokesperson stated that the scale of Iran's retaliation would far exceed previous levels.

The escalation of the Iran situation intensified market worries about rising inflation. On March 19th, major European stock indices collectively fell. By the latest update, Germany's DAX 30 index had extended its loss to 2.41%, France's CAC 40 was down 1.78%, and the UK's FTSE 100 declined 2.02%. Other indices, including the Euro Stoxx 50, Spain's IBEX 35, Sweden's OMX SPI, Austria's ATX, and Italy's FTSE MIB, all saw losses exceeding 2%. Portugal's PSI 20, Belgium's BFX, and the Netherlands' AEX indices fell more than 1.70%.

The European Central Bank, Bank of England, Swedish Riksbank, and Swiss National Bank are scheduled to announce monetary policy decisions. Market expectations widely anticipate that these central banks will hold interest rates steady across the board, as policymakers monitor the developments of the conflict with Iran and assess its impact on regional growth and inflation prospects.

Shortly before reporting, Switzerland maintained its policy rate at 0%, aligning with market forecasts. The Swedish Riksbank kept its benchmark rate unchanged at 1.750%, indicating that the rate would remain at its current level for the foreseeable future.

Despite European countries importing relatively little oil and gas directly from the Middle East, energy prices have risen significantly. Analysts warn that European buyers will face intense competition from Asian importers for energy supplies from other regions, potentially driving prices even higher.

Sander Tordoir, Chief Economist at the Centre for European Reform, noted that while overall public finances in Europe remain sound, the outlook would be concerning if large-scale subsidies similar to those in 2022 were repeated. In 2022, EU energy subsidies nearly doubled from the previous year to €397 billion. Over two years, the UK government provided approximately £75 billion in support, including subsidies for household energy bills. Tordoir commented, "If European countries need to spend on this scale again in the future, it is possible, but it would be very painful."

International media pointed out that the UK may be the most prominent example. This week, the UK government announced £53 million in funding to assist households reliant on heating oil, a particular issue in Northern Ireland. However, the government has not yet taken broader measures, such as delaying an upcoming increase in fuel duty. The UK government is currently strictly adhering to fiscal rules to reassure bond investors concerned about high debt and low growth prospects. UK government bond yields often rise faster than those of neighboring countries during market sell-offs, increasing borrowing costs. Last year, debt interest payments accounted for one pound in every ten pounds of UK government spending. Just as fiscal conditions were beginning to improve, the conflict with Iran threatens to disrupt this trend. Tordoir stated, "The UK is particularly vulnerable."

Marcel Fratzscher, President of the German Institute for Economic Research (DIW Berlin), stated that Germany, as Europe's largest economy, has very little fiscal flexibility. In 2022, Germany temporarily reduced taxes on petrol and diesel, a measure that alone cost €3 billion. The institute estimates that if oil and gas prices remain at current levels for the full year, Germany's economic growth rate for this year could be halved to 0.5%. Fratzscher said, "This is not something the government can solve by finding funds within the existing budget or through simple reallocations, and this is just the beginning."

France faces a similar situation. Although its energy mix is more stable due to a large share of nuclear power, the French government has long struggled to reduce its debt level.

Greece, Spain, and Portugal present relative bright spots. Previously, these countries were major concerns due to high debt and weak fiscal discipline, but their fiscal situations have now improved: some have reduced debt, while others, like Spain, have built buffers through strong economic growth. This enables them to be among the first to implement measures to shield households and businesses from rising costs.

According to reports, on March 19th local time, the spokesperson for the Central Command of Iran's Armed Forces stated that the offensive and defensive operations of Iran's armed forces are continuing with unprecedented intensity. He stated that attacking Iran's energy infrastructure was a major mistake, and Iran's retaliation is ongoing and not yet concluded. If such incidents recur, Iran will launch further attacks on the energy infrastructure of the U.S., Israel, and their allies, aiming for complete destruction, with a retaliatory scale far exceeding previous levels.

Also on the 19th local time, the Israeli Defense Forces detected a new wave of ballistic missile attacks originating from Iran. This was reportedly the eighth such wave since the early hours of the day, with no reports of casualties at the time. Preliminary military assessments indicated that the missile was likely intercepted, and the attack triggered alarms in the Jerusalem area and parts of central Israel.