SPAIN’s stock market is bracing for a brutal start to the week as Middle East conflict sends the Ibex 35 tumbling.
The Ibex 35, Spain’s main stock market index tracking the country’s 35 largest companies, fell 2.2% at Monday’s market open.
This follows a 7% plunge last week, the index’s worst weekly performance since March 2022, after the outbreak of the war in Ukraine.
The plunge is driven by tensions in the Middle East involving the United States, Israel and Iran, which have caused a sharp spike in oil prices.
Investors are shifting money out of riskier assets and into safe havens, particularly the United States dollar, which has strengthened since the conflict began.
Among European indices, the Ibex 35 has been hit particularly hard due to its exposure to the banking and energy sectors.
Major banks, including Santander, BBVA and CaixaBank, play a central role in the index.
Banks are especially vulnerable because they rely on credit demand, which has weakened as borrowing and spending decline amid global uncertainty.
Energy companies, such as Repsol and Solaria, also carry significant weight in the Ibex.
While Repsol has benefited from higher oil prices, most other energy companies in the index are declining.
Rising energy costs may increase profits in the short term but also curb consumer spending and prompt investors to sell shares.
The Ibex 35 is particularly sensitive to global economic uncertainty because many of its companies are vulnerable to swings in consumer demand and investor anxiety.
READ MORE: Spain’s King Felipe calls for ‘restraint’ over use of force in US-Israeli conflict with Iran
Its dramatic drop comes as global markets experience widespread turmoil.
In Europe, the STOXX 600, which tracks 600 of the largest companies across 17 countries, has fallen 1.8% since Monday morning and plunged 5.5% last week, marking its worst weekly performance in nearly a year.
With no end in sight to the hostilities in the Middle East, the Ibex 35 is expected to face further losses this week.
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