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March 9, 2020, 2:37 p.m. EDT

European stocks suffer worse trading session since financial crisis as Saudi Arabia starts oil-price war and Italy locks down region

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By Steve Goldstein, MarketWatch

Saudi Aramco's Ras Tanura oil refinery and terminal.

European stocks dropped more dramatically Monday than in any single session since the financial crisis, after Saudi Arabia started a price war and Italy locked down a key region.

The Stoxx Europe 600 /zigman2/quotes/210599654/delayed XX:SXXP +0.26% retreated by more than 7%, its worst single-day percentage drop since the 2008 financial crisis, as it closed at its lowest level since Jan. 2, 2019. On the London Stock Exchange, there were 3,217 decliners and just 238 advancers.

Related: Among the S&P 500, 490 stocks are trading lower Monday — these 10 are up

Brent crude-oil futures /zigman2/quotes/209704782/delayed UK:BRN00 -0.44% plunged nearly $9 a barrel.

Saudi Arabia slashed prices after failing to reach an agreement with Russia on production cuts and announcing it would increase output next month.

The International Energy Agency cut its global oil demand, now expecting a 90,000-barrel-a-day decline this year, from a previous forecast of an increase in demand of 825,000 barrels a day.

Smaller oil players including Tullow Oil /zigman2/quotes/205079109/delayed UK:TLW +0.63% and Aker BPlost about a third of their value.

Of the majors, BP /zigman2/quotes/202286639/delayed UK:BP +1.05% dropped 19% and Royal Dutch Shellfell 17%.

“Already facing a supply-demand imbalance, the market is set to see significantly more crude oil in the short term. We also view the cuts to Europe as signaling Saudi Arabia’s intention to force Russia back to the negotiating table, with the aim of delivering a new production-curb agreement,” said Mark Haefele, chief investment officer at UBS Global Wealth Management.

The market did not seem to price in much of a gain for consumers from lower gasoline prices.

The boost is “unlikely to be large enough to stabilize a world economy” coping with the impact of COVID-19, but lower oil prices “could prove a favorable environment once the impact of the virus has passed later this year. The oil-price fall also boosts market uncertainty — and obviously today’s events demonstrate there’s a lot of fear about already,” said Shamik Dhar, chief economist at BNY Mellon Investment Management.

Don’t miss: How an ‘oil shock’ and coronavirus combined to spark a global stock-market selloff

Also see: These oil stocks are taking the worst beatings after Saudi Arabia shocks the energy market

Italy, meanwhile, announced a sweeping quarantine for its northern regions. The country’s FTSE MIB index /zigman2/quotes/210598024/delayed IT:I945 +0.83% slumped nearly 10%.

“The markets are looking at what is happening in Italy as a sign of what may be coming elsewhere in Europe, as the virus continues to spread,” said Ricardo Evangelista, a senior analyst at the brokerage ActivTrades.

+1.19 +0.26%
Volume: 0.00
Jan. 27, 2023 11:03p
UK : U.K. ICE Futures Europe
$ 86.02
-0.38 -0.44%
Volume: 14,886
Jan. 30, 2023 5:41a
UK : U.K.: London
38.16 p
+0.24 +0.63%
Volume: 6.78M
Jan. 27, 2023 4:35p
P/E Ratio
Dividend Yield
Market Cap
£549.35 million
Rev. per Employee
UK : U.K.: London
489.30 p
+5.10 +1.05%
Volume: 28.24M
Jan. 27, 2023 4:35p
P/E Ratio
Dividend Yield
Market Cap
£88.14 billion
Rev. per Employee
IT : Borsa Italiana
+218.19 +0.83%
Volume: 0.00
Jan. 27, 2023 5:35p

Steve Goldstein is MarketWatch markets editor for Europe. Follow him on Twitter: @MKTWgoldstein.

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