European shares dip as US-Iran tensions weigh on sentiment

EUROPEAN equities fell on Tuesday as uncertainty over US-Iran peace talks kept investors cautious, hours before a ceasefire is due to expire.

President Donald Trump said he did not want to extend the ceasefire and the US military was “raring to go” if any negotiations failed.

Pakistan said it was still awaiting confirmation from Iran that its delegation would attend peace talks in Islamabad.

The pan-European Stoxx 600 index closed down 0.9 per cent at 616.03 points. Major regional markets also fell, with France’s CAC 40 and London’s FTSE 100 each down 1.1 per cent.

Germany’s DAX dipped 0.6 per cent. German investor morale fell to its lowest in more than three years in April, the ZEW economic research institute said.

Concerns over oil supply disruptions continued to weigh on Europe’s energy-dependent economies, with many companies flagging conflict-related risks in quarterly earnings.

“I think European markets are likely to see a bigger bump in inflation, which will probably lead to rate hikes from the ECB. And that will just upset the narrative of ‘it’s time to be long Europe’,” said Chris Beauchamp, chief market analyst at IG Group.

A 3 per cent rise in crude oil prices lifted the energy sector, which added 0.4 per cent.

The aerospace and defence index led declines, sliding 4.8 per cent for its steepest one-day drop since April 2025.

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Europe’s largest defence technology group Thales fell 6 per cent after first-quarter sales missed forecasts. Aircraft-engine makers Safran and Rolls-Royce dropped more than 6.5 per cent each.

Healthcare stocks also weighed on the index, with the sector down 2 per cent. Wegovy maker Novo Nordisk fell 4.2 per cent, while AstraZeneca and GSK each lost more than 2.5 per cent.

The food and beverages index declined 1.8 per cent after Royal Unibrew plunged 24.8 per cent. The Danish brewer said its partnership with PepsiCo in northern Europe was set to end.

Some analysts said the pullback in Europe offered selective buying opportunities, with shares trading at a discount to US peers.

“For those investors who are willing to take the time and actively manage their European exposure, there are intriguing opportunities, not only from a value perspective but also in certain areas and in certain pockets on a growth perspective as well,” said Eric Parnell, chief market strategist at GVA Wealth Management.

Markets are pricing in an 84 per cent chance that the European Central Bank will keep interest rates unchanged at next week’s meeting, according to LSEG data. REUTERS