European equity markets fell sharply on Wednesday, extending losses from the previous session as renewed Middle East hostilities intensified inflation concerns across the continent.
Oil prices and government bond yields jumped after U.S. President Donald Trump declared the Iran ceasefire “is over” during the NATO summit.
Iran’s Revolutionary Guards said they targeted U.S. military sites in Bahrain and Kuwait, hours after the U.S. launched a wave of military strikes on Iran.
The escalating conflict raised fresh fears about prolonged supply disruptions and added significant uncertainty to the global economic outlook heading into the second half of 2026.
Market participants are also awaiting the release of the minutes from the first Federal Reserve meeting chaired by Kevin Warsh, hoping for further clues about the central bank’s future interest rate path.
The U.K.’s FTSE 100 Index was down 0.9%, while France’s CAC 40 Index and Germany’s DAX Index each dropped 1.7%, reflecting broad-based selling pressure across European markets.
Energy majors BP Plc (LSE:BP.) and Shell (LSE:SHEL) bucked the wider trend, advancing strongly as Brent crude climbed above $76 per barrel for the first time in two weeks amid fears of prolonged supply disruptions.
Housebuilder Vistry (LSE:VTY) fell heavily after warning of a first-half loss and revealing plans to streamline its operations during what management is framing as a transition year.
Student accommodation specialist Unite Group (LSE:UTG) retreated after stating that annual rental growth is now expected to come in slightly below previous guidance, disappointing investors.
Property developer Hammerson (LSE:HMSO) also lost ground after announcing the disposal of £69 million of non-core assets, adding to negative sentiment in the property sector.
Kering (EU:KER) weakened after revealing that its Italian luxury brand Gucci had signed a 50-year exclusive beauty licensing agreement with French cosmetics group L’Oreal (EU:OR), with L’Oreal shares also down 1 percent on the news.
IG Group Holdings (LSE:IGTG) declined sharply after the online trading company unveiled plans to create a new Jersey-based holding company, adding further corporate uncertainty for investors to digest.
With geopolitical risk now firmly back at the forefront of market concerns, traders across Europe face a volatile period ahead as central bank policy and energy prices remain deeply intertwined with developments in the Middle East.