Eurozone benchmark blue-chip equities briefly fell to a four-month low, with concerns over France's fiscal risks triggering a selloff in banking stocks.

The Euro Stoxx 50 index closed down 1.5%, having fallen as much as 1.9% during the session, led by declines in bank and technology shares. Both sectors rank among the best-performing segments in Europe this year.

The Euro Stoxx Banks Index dropped 3.4%, with UniCredit and BBVA among the biggest drags on the index.

Market volatility also picked up, with the Euro Stoxx 50 Volatility Index rising 7.8% to 19.1 points.

Rising European bond yields weighed on banking stocks, as investors sold French government debt amid the country's political and economic crisis.

On Wednesday, the spread between French and German 10-year government bond yields widened to around 140 basis points.

The multiple crises facing France could push the European Central Bank into a standoff with investors, a situation not seen since the eurozone debt crisis more than a decade ago.

Aneeka Gupta, research director at WisdomTree UK, said: "What we are seeing in France is a repricing of fiscal and political risk, not a solvency crisis. The market is demanding a political risk premium, rather than questioning France's ability to repay its debt."

Meanwhile, the pan-European Stoxx 600 index fell 1%.

Recent attacks by Iran on oil tankers in the Strait of Hormuz have become increasingly frequent, pushing Brent crude to around $101 a barrel.