European shares fall as fading US-Iran peace hopes lift oil prices

European shares fell sharply on Tuesday as fading hopes of a peace deal between the United States and Iran pushed oil prices higher and weighed on investor sentiment across the region.

Markets remained under pressure after US President Donald Trump said the ceasefire with Iran was “on life support.”

Tehran also rejected a US proposal aimed at ending the conflict and instead presented a list of demands that Trump dismissed as “garbage.”

The renewed uncertainty over the conflict heightened concerns about global economic stability and potential energy supply disruptions as oil prices climbed

STOXX 600 and regional markets decline

The pan-European STOXX 600 index fell 1.1% to 605.79 points as of 0703 GMT.

Regional markets also traded lower, with major European indexes posting losses early in the session.

London’s FTSE 100 and Germany’s DAX both declined more than 1%, reflecting broader weakness across European equities as investors moved away from riskier assets.

The market decline came as traders closely monitored developments in the Middle East and assessed the potential impact of prolonged geopolitical tensions on global growth and inflation.

Strait of Hormuz concerns weigh on sentiment

Investor concerns intensified over the possibility of disruptions to the Strait of Hormuz, a critical shipping route for global energy supplies.

Fears surrounding the closure of the waterway continued to pressure energy-dependent European markets, keeping them below levels seen before the conflict escalated.

Higher oil prices added to worries that inflationary pressures could remain elevated for longer, complicating the outlook for central banks and economic growth.

The ongoing uncertainty surrounding the Iran conflict also kept investors cautious ahead of key economic data releases.

Inflation data in focus

Germany’s official data released on Tuesday showed that inflation in April accelerated slightly to 2.9%.

The inflation reading added another layer of concern for investors already grappling with rising energy prices linked to geopolitical tensions.

Market participants were also awaiting US inflation data later in the day to assess whether the Iran conflict had started influencing broader price trends.

The data is expected to offer further clues on inflationary pressures and their potential impact on financial markets.

Thyssenkrupp shares fall after outlook cut

Among individual stocks, shares of German conglomerate Thyssenkrupp fell 2.4% after the company lowered its 2026 sales outlook.

The decline added to the negative mood in European markets, with investors remaining cautious about corporate earnings prospects amid rising geopolitical and economic uncertainty.

Overall, the combination of renewed tensions in the Middle East, higher oil prices, inflation concerns, and weaker corporate guidance kept pressure on European equities during early trading on Tuesday.