European equity markets traded modestly higher on Wednesday as investors continued to monitor developments in the Middle East while digesting a fresh wave of corporate earnings.
At around 08:05 GMT, Germany’s DAX advanced 0.6%, France’s CAC 40 gained 0.5%, and the U.K.’s FTSE 100 edged up 0.1%.
Conflict in the Middle East remains in focus
Military activity involving the United States, Israel and Iran continued overnight. U.S. Admiral Brad Cooper, commander of American forces in the region, said Iran’s air defence capabilities had been significantly weakened and that its navy had lost operational control of key waterways after 17 vessels were destroyed. He also stated that more than 2,000 Iranian targets had been struck.
At the same time, Israel continued strikes against the Iran-backed Hezbollah group in neighbouring Lebanon after militants launched attacks in retaliation for the death of Supreme Leader Ayatollah Ali Khamenei during the initial strikes on Saturday.
Iran has also launched missiles and drones toward neighbouring Arab countries hosting U.S. military bases, widening the scope of the conflict across the region.
“Energy prices have soared over the last couple of days, especially European gas, and this is preventing bonds/yields from acting as circuit breakers,” said analysts at Vital Knowledge. “If energy holds at present levels, it will create a major headwind for consumers globally.”
“Looking beyond the immediate term, lurking in the background is the potential for the Iran campaign to yield a medium and long-term positive outcome for equities by finally ending a war” that began back in 2023.
Corporate results in focus
Alongside geopolitical developments, investors were also focused on corporate earnings from several major European companies.
Bayer (TG:BAYN) disappointed the market after issuing a 2026 profit outlook below expectations, as the German pharmaceutical group continues to face expensive litigation and a heavy debt burden.
German automotive supplier Continental (TG:CON) said it expects largely stable sales and profitability in its core tyre division in 2026, citing ongoing volatility in demand.
Sportswear company Adidas (TG:ADS) forecast operating profit of around €2.3 billion this year, despite anticipating roughly €400 million in negative effects from U.S. tariffs and adverse currency movements.
French reinsurer SCOR (EU:SCR) reported stronger-than-expected fourth-quarter net income, supported by solid underwriting results in both property and casualty as well as life and health operations.
In the U.K., Metro Bank (LSE:MTRO) announced underlying pre-tax profit of £98 million for 2025, marking the highest level in the lender’s 15-year history and surpassing its cost-cutting targets.
Meanwhile, Traton (BIT:18TRA) proposed a dividend for fiscal year 2025 at roughly half the level paid the previous year after the Volkswagen-owned truckmaker reported a steep decline in earnings tied to a sharp downturn in its North American business and the impact of U.S. tariffs.
Eurozone data awaited
On the macroeconomic front, investors are watching for the release of February services PMI data as well as the latest unemployment figures for the eurozone.
However, the data may have limited impact on European Central Bank policy expectations, particularly after figures released Tuesday showed eurozone inflation unexpectedly accelerated last month.
Inflation across the 21 countries using the euro rose to 1.9% from 1.7% the previous month, exceeding forecasts of 1.7%. Price pressures could intensify further if the Middle East conflict continues to drive energy prices higher.
Financial markets currently expect the ECB to keep its deposit rate unchanged at 2% for the time being, though the possibility of a rate increase later in the year is beginning to emerge.
Oil prices extend rally
Oil prices continued to climb on Wednesday as escalating tensions in the Middle East raised fears of supply disruptions.
Brent crude futures jumped 2.9% to $83.78 per barrel, while U.S. West Texas Intermediate crude gained 2.6% to $76.51 per barrel.
Both benchmarks had already risen nearly 5% in the previous session after gaining about 7% on Monday. The Brent contract has now reached its highest level since July 2024.
According to Reuters, Iraq—the second-largest producer within the Organization of the Petroleum Exporting Countries—has reduced production by roughly 1.5 million barrels per day due to storage constraints and limited export routes.
Meanwhile, Iran has targeted tankers passing through the Strait of Hormuz, a critical route that handles about one-fifth of global oil and liquefied natural gas shipments, effectively halting traffic for a fourth consecutive day.
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