FRANKFURT: Europe’s STOXX 600 ended a choppy session little changed on Wednesday, as investors weighed a renewed flare-up in tensions between the US and Iran and looked ahead to the European Central Bank’s upcoming monetary policy decision.
Crude oil prices were higher and hovered near USD93 a barrel after one of the biggest exchanges in hostilities between the US and Iran since the two countries agreed to a ceasefire in April.
US President Donald Trump said on Wednesday Iran had taken too long to negotiate a deal and would now “have to pay the price,” while Tehran said it would reassess diplomatic engagement with Washington.
“What we are seeing today looks more like sporadic fire exchange rather than a broadening or restart of the wider conflict,” Luca Bindelli, head of investment strategy at Lombard Odier, said.
Bindelli added that both Washington and Tehran have clear reasons to seek a deal, as a resolution could help Trump politically, while Iran is under pressure because large volumes of its oil remain stuck near the Strait of Hormuz due to the US blockade.
The pan-European STOXX 600 index was down 0.08 percent at 618.17 points, closing lower for the fourth consecutive session.
Investor sentiment was also affected by a darker outlook for Europe’s largest economy. Germany is likely to slide into a technical recession this year as an energy-price shock linked to the Iran war derails its fragile recovery, the DIW economic institute said, halving its 2026 growth forecast. The country’s main stock index dropped about 1 percent.
Attention now turns to the ECB, whose two-day policy meeting began on Wednesday. The central bank is widely expected to raise interest rates by 25 basis points as it tries to contain the inflationary impact of higher energy costs. Markets will be focused on policymakers’ guidance for the rate path beyond this week.
Meanwhile, US consumer inflation rose in May at its fastest pace in three years. While the increase matched expectations, it reinforced the case for the Federal Reserve to keep rates unchanged into 2027.
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