Source: Sharecast
The Stoxx 600 was down 0.9% at 541.98 by lunchtime, with heavy losses of 1% or more registered in Frankfurt, Paris, Milan and Madrid, tempered by only mild declines of 0.5% in London and Zurich. Banks were among the worst performers of the day.
"European stocks are extending losses as we move through the European morning session, and US equity market futures also point to a lower open," said Kathleen Brooks, research director at XTB. "Headline risk from the Iran/ Israel conflict is once again impacting financial markets, after taking a reprieve on Monday."
The Stoxx 600 had bounced off a one-month low on Monday as reports that Tehran would be willing to return to the negotiating table with Tel Aviv, with oil prices tracking back after surging to a five-month high on Friday.
However, a fresh wave of attacks from both sides dampened those hopes overnight, with Israeli prime minister Benjamin Netanyahu saying his country was “not backing down” from eliminating Iran’s nuclear programme. Brent crude was up 1.8% at $74.51 a barrel by 1206 BST.
Meanwhile, in a post on Truth Social earlier, US president Donald Trump said he had not reached out to Iran for "peace talks in any way, shape, or form".
Trump had left the G-7 Summit in Canada one day early and urged Iran to evacuate Tehran, suggesting an escalation of the conflict was imminent, further dampening sentiment on the markets.
In macro news, investor sentiment in Germany rose much more than expected this month, as interest-rate cuts and improving government finances helped bolster confidence. The ZEW survey jumped to 47.5 in June, up from 25.2 in May. This was well ahead of the consensus forecast of 35 and within a handful of points of the 51.6 mark reached in March – its highest since February 2022.
Market movers
Banking stocks were in the red across the continent, with investors selling off economic bellwethers in light of rising geopolitical risks. French lenders Societe Generale and BNP Paribas were out of favour, along with German peers Commerzbank and Deutsche Bank, and UK giants HSBC and Barclays.
In Madrid, Banco Sabadell was lower after confirming that it is exploring a potential sale of high street lender TSB. In a brief statement following widespread media reports, the lender said it had received "preliminary non-binding expressions of interest for the acquisition of the entire share capital of TSB" and confirmed it would weigh up any potential binding offer.
Kering was leading the fallers in Paris after the French luxury brand surged the previous session on hopes that Renault boss Luca de Meo would be joining as CEO.
Truck makers Volvo and Daimler Truck were both lower after announcing a new joint venture over software development for commercial vehicles called Coretura.
On the FTSE 100, downside was limited by solid gains from energy majors BP and Shell as they tracked oil prices higher. The FTSE 100 was also supported by the news that UK Prime Minister Keir Starmer and Trump had signed off a trade deal at the G7 summit.
Also rising was FTSE 250-listed construction services group Morgan Sindall which surged 17% after saying that full-year results for 2025 will be "significantly ahead" of previous expectations.