European equities drop amid Middle East uncertainty

The pan-European STOXX 600 index closed down 0.9% at 616.03 ​points

European equities dropped on Tuesday as uncertainty over Iran-U.S. peace talks kept investors cautious, ‌hours before a ceasefire is due to expire.

The U.S. president said he did not want to extend the ceasefire and the country’s 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% at 616.03 ​points. Major European markets also dropped, with France’s CAC 40 and London’s FTSE 100 ⁠each down 1.1%.

Germany’s DAX dropped 0.6%. 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 war-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% rise ​in crude oil prices lifted the energy sector, which advanced 0.4%.

The aerospace and defence index led declines, slipping 4.8% ‌for its steepest one-day decline since April 2025.

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

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

The food and beverages ​index dropped 1.8% after ⁠Royal Unibrew slumped 24.8%. The Danish brewer said its partnership with PepsiCo in northern Europe was set to end.