European equity markets showed little clear direction on Tuesday as investors weighed signs of easing tensions in the Middle East while looking ahead to the European Central Bank’s upcoming interest rate decision.
By 03:04 ET (07:04 GMT), the pan-European Stoxx 600 was broadly flat. Germany’s DAX slipped 0.1%, France’s CAC 40 traded near unchanged levels, and the UK’s FTSE 100 fell 0.4%.
Sentiment was supported by announcements from Iran and Israel that they had suspended their recent exchange of attacks, helping to calm concerns over regional instability and raising hopes that U.S. President Donald Trump may be able to secure a diplomatic agreement with Tehran.
However, uncertainty remained elevated. The Strait of Hormuz, a critical route for around one-fifth of global oil and liquefied natural gas shipments, continues to face severe restrictions on tanker traffic, while Trump has indicated that the U.S. blockade of Iranian ports will remain in force.
Brent crude, the international oil benchmark, declined 1.0%, although prices remain significantly above levels seen before the conflict. At the same time, Eurozone government bond yields moved lower as investors sought safer assets.
Markets remain alert to the risk that higher energy costs could fuel another wave of inflation, potentially prompting central banks to maintain a restrictive policy stance.
The European Central Bank is widely expected to raise interest rates on Thursday as policymakers continue to focus on controlling inflation despite signs of slowing economic momentum across the 21-country euro area. In the United States, investors are also increasingly pricing in another rate increase from the Federal Reserve before year-end, following stronger-than-expected employment data released in May.
On the corporate front, GlaxoSmithKline (LSE:GSK) shares fell 2.1% after the pharmaceutical group announced an agreement to acquire oncology company Nuvalent for $10.6 billion. The transaction will provide GSK with access to three lung cancer treatment candidates and further strengthen its oncology pipeline.
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