European stock markets fell sharply on Tuesday as the escalating Middle East conflict continued to weigh on global investor sentiment.
At 03:05 ET (08:05 GMT), Germany’s DAX index dropped 1.9%, France’s CAC 40 declined 1.2%, and the UK’s FTSE 100 slipped 1%, reflecting broad-based selling across the region.
Middle East conflict deepens market uncertainty
European equities extended losses as tensions between the United States and Iran, which intensified over the weekend, raised fears of a wider regional conflict across the Gulf.
Reports indicated that the U.S. embassy in Riyadh was targeted by missile strikes. Amazon data centers in the UAE and Bahrain were also reportedly hit, as Iran launched retaliatory attacks across multiple Middle Eastern countries.
The developments have shaken confidence in the perceived safe-haven status of Gulf financial hubs such as Dubai.
At the same time, Israel confirmed it was conducting military operations against both Iran and Lebanon after Hezbollah, backed by Tehran, launched missiles and drones toward Tel Aviv.
The U.S. State Department announced it had ordered the departure of non-essential government personnel and their families from Bahrain, Iraq and Jordan.
Overnight, U.S. President Donald Trump stated that Washington would do “whatever it takes” to achieve its military objectives, suggesting that operations could continue for several weeks.
Corporate earnings remain in focus
Despite geopolitical concerns dominating headlines, investors are also assessing fresh corporate earnings across Europe.
Thales reported stronger-than-expected fourth-quarter results, supported by solid performance in its Aerospace and Defence divisions, although its Cyber & Digital segment remained under pressure.
SIG Group posted a loss for 2025 after recording €350.7 million in one-off charges linked to a strategic review. Revenue remained broadly stable amid a challenging market environment.
Kuehne & Nagel reported a 24.8% decline in annual profit for 2025, citing currency headwinds and weaker margins. The Swiss logistics group’s equity ratio fell to 18.5% from 27.8% a year earlier.
Lottomatica exceeded full-year expectations, delivering 21% profit growth as the Italian gaming operator expanded its online market share.
Eurozone inflation data ahead
Investors are also awaiting the release of Eurozone flash inflation data for February, particularly as energy prices continue to climb.
Headline annual inflation is expected to come in at 1.7%, unchanged from January. Core inflation, which excludes food and energy, is forecast at 2.2% year-on-year.
Oil prices surge on Strait of Hormuz risks
Oil prices extended gains following a sharp rally in the previous session, driven by concerns over supply disruptions through the Strait of Hormuz.
Brent crude futures jumped 4.3% to $81.10 per barrel, while U.S. West Texas Intermediate crude rose 4% to $74.05 per barrel. Both benchmarks had already closed more than 7% higher on Monday after climbing as much as 13% to one-year highs.
Tensions intensified after Iranian officials warned they could target any vessel attempting to pass through the Strait of Hormuz. The key waterway handles a significant share of global oil exports, and any disruption could have major implications for energy markets.
