European markets held steady on Wednesday as investors cautiously weighed ongoing tensions between Israel and Iran alongside the upcoming conclusion of the U.S. Federal Reserve’s policy meeting.
At 07:05 GMT, Germany’s DAX index dipped 0.1%, France’s CAC 40 gained 0.2%, and the U.K.’s FTSE 100 rose 0.1%.
Israel-Iran Conflict Raises Market Unease
The conflict between Israel and Iran entered its sixth day amid heightened geopolitical tensions. A Wall Street Journal report revealed that U.S. President Donald Trump convened senior advisers to discuss options, including potential strikes on Iran. Trump demanded Tehran’s “unconditional surrender” and claimed U.S. control over Iranian airspace, fueling fears of broader regional escalation.
Fed Meeting Nears Conclusion
Investors remain cautious ahead of the Federal Reserve’s two-day meeting wrap-up. While a rate hold is widely expected, markets will closely scrutinize Chair Jerome Powell’s remarks and updated economic forecasts, especially given signs of cooling U.S. retail sales and increased recession risks. Currently, markets anticipate two rate cuts by year-end, though this outlook could shift post-meeting.
U.K. Inflation Moderates
U.K. inflation slowed in May as consumer prices rose 3.4% year-on-year, slightly down from April’s 3.5%. Services inflation—a key focus for the Bank of England—fell to 4.7% from 5.4%, aligning with forecasts. The BoE is expected to keep rates steady on Thursday after a May rate cut to 4.25%, with two more 0.25% cuts priced in by year-end.
Other Highlights
- Sweden’s Riksbank will announce its interest rate decision later Wednesday.
- UBS was downgraded to “underweight” by Morgan Stanley due to capital uncertainties and weaker earnings prospects.
- Oil prices eased slightly, with Brent crude down 0.1% to $76.38 and WTI crude down 0.1% to $73.21, retreating from a 4% surge amid supply disruption fears in the Strait of Hormuz.
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