European shares drop amid evolving Middle East situation

The pan-European STOXX 600 index slipped 0.4% to 617.27 points

European shares slid on Wednesday as the evolving situation in the Middle East kept investors cautious, while they also assessed a range of corporate earnings.

The pan-European STOXX 600 index slipped 0.4% to 617.27 points. Most regional bourses were lower, with Spain’s IBEX 35 down 0.5%, while France’s CAC slid 0.6%.

Optimism surrounding a diplomatic resolution has helped the ⁠STOXX 600 recover from its March lows, but worries over the impact of soaring oil prices have affected the performance of European equities.

European companies are very much dependent on oil prices. Big exporters like Germany are suffering and that is ​having a negative impact on European markets, said Axel Rudolph, senior market analyst at IG Group.

That’s why they’re underperforming. Nobody sees the oil price coming down anytime soon, even if we were to have a peace agreement tomorrow, Rudolph said.

The European Union warned member countries that a prolonged supply ​shock due to the Iran conflict would force cuts to fuel consumption.

Corporate earnings remained ​a key focus for investors.

Luxury sector led losses with a 2.5% drop and is the worst-performing sector so far this year.

Even large luxury names are not immune to a cooling in demand given that shoppers are no longer flying to the Middle East. In Europe, people at the ​moment are more worried about ​their wallets so luxury goods’ ⁠shopping is on the back burner, Rudolph added.

The technology sector slid 0.3%. ASML declined 4.2%, weighing on the sector, even after the supplier of chipmaking tools raised its 2026 revenue outlook.