European stocks saw their sharpest decline since July, with oil's climb amplifying inflation worries and prompting traders to increase wagers on additional interest rate increases by central banks.

The Stoxx Europe 600 index fell 1.4% for the session. The retail sector lagged behind, as Inditex SA dropped 3.6% following first-half earnings that missed analyst projections. Consumer goods and construction shares also turned in weak performances.

Europe's benchmark index has been oscillating within a tight band since touching an all-time high in August, with investors growing more concerned about the risk of rising inflation and the possibility of further monetary policy tightening.

After renewed clashes between the US and Iran, Brent crude oil breached the $100 per barrel mark for the first time since July. Traders currently anticipate four quarter-point hikes from both the European Central Bank and the Bank of England by the end of 2027.

"The $100 per barrel level for oil appears to be the key trigger for the current market narrative," noted Emilie Tetard, a strategist at Natixis CIB.