By Peter Nurse

Investing.com - European stock markets traded largely lower Wednesday, after Russian President Vladimir Putin ratcheted up geopolitical tensions, while investors braced for another hefty interest rate hike by the U.S. Federal Reserve.

By 03:55 ET (07:55 GMT), the DAX in Germany traded 0.4% lower, the CAC 40 in France fell 0.4%, while U.K.’s FTSE 100 rose 0.4%.

Putin declared a partial mobilization of the country's 2-million-strong military reserve in a recorded video address earlier Wednesday, confirming his intention to annex those parts of Ukraine currently under Russian occupation.

This represents a significant escalation of the conflict in Ukraine, and ramps up the uncertainty over the extent of economic damage the European nations will have to endure.

The market was already fretting about the conclusion of the Federal Reserve’s policy-setting meeting later in the session, with the U.S. central bank widely expected to hike interest rates by at least 75 basis points following last week’s hotter-than-expected U.S. inflation reading.

The decision is due at 14:00 ET (18:00 GMT), and the Fed will also update its quarterly economic projections, which should provide guidance over where the policymakers think interest rates are heading, how long it will take inflation to fall, and the likely impact on economic growth along the way.

While the Fed headlines the week, the Bank of England, the Swiss National Bank, the Bank of Japan, and the Norges Bank in Norway are also announcing policy decisions this week.

Sweden's Riksbank started the ball rolling, surprising with a full percentage-point hike on Tuesday.

The European economic data slate is largely empty Wednesday, although the CBI industrial trends orders survey should show a deterioration of business confidence in the U.K. in September.

In corporate news, Fortum (HE:FORTUM) stock rose 14% after Germany agreed to nationalize Uniper (ETR:UN01) by buying the Finnish energy giant’s stake in the gas importer.

Oil prices soared Wednesday, bouncing after the previous session’s losses, after Putin’s move raised fears of a further curtailing of energy supply from Russia.

U.S. crude stocks rose by about 1 million barrels last week, data from the American Petroleum Institute showed on Tuesday, indicating some weakness in demand among U.S. consumers. Official data from the Energy Information Administration are due later in the session.

By 03:55 ET, U.S. crude futures traded 2.8% higher at $86.26 a barrel, while the Brent contract rose 2.7% to $93.06. Both contracts fell more than 1% on Tuesday, and are on track for the first quarterly loss in more than two years.