European equity markets fell sharply on Wednesday afternoon after U.S. President Donald Trump said the framework agreement that had supported a ceasefire with Iran was effectively finished, triggering a broad risk-off move across global markets.
The pan-European STOXX 600 index, which had been down around 0.4% earlier in the session, extended its losses to 1.7% as investor confidence deteriorated. The comments weakened expectations of a diplomatic resolution to the conflict and prompted a widespread sell-off across European equities.
Trump Says Ceasefire Framework Is “Over”
Speaking during the NATO summit in Ankara, President Trump dismissed the future of the Islamabad Memorandum of Understanding (MoU), the agreement that had underpinned a fragile 60-day ceasefire introduced in June.
“We make a deal, and everyone’s agreed. No nuclear weapons. We make a deal. They go outside, talk to the press, they say we never even talked about it. There’s something wrong with them. They’re cuckoo. As far as I’m concerned, it’s over,” Trump said.
The apparent collapse of the agreement has renewed concerns that shipping through the Strait of Hormuz could once again face significant disruption, increasing uncertainty for global energy markets and international trade.
Germany’s DAX declined 2.4%, France’s CAC 40 fell 2.2%, while London’s FTSE 100 and Italy’s FTSE MIB both dropped more than 1.5%.
Oil Prices Jump as Geopolitical Risks Return
Energy markets reacted strongly to the latest developments, with Brent crude futures climbing 5.4% after already posting gains earlier in the trading session.
The renewed tensions have prompted traders to factor a greater risk of supply disruptions into oil prices, reversing recent expectations that geopolitical pressures on global energy supplies were easing.
Markets Await Federal Reserve Minutes
Investor attention is also focused on the release of the U.S. Federal Reserve’s June meeting minutes later in the day.
The minutes will provide the first detailed insight into policy discussions under the central bank’s new chairman, Kevin Warsh. Markets are closely watching for indications of how the Federal Reserve intends to communicate its monetary policy following Warsh’s comments favouring a less guidance-driven approach.
With several policymakers having recently indicated they remain open to further interest rate increases if inflation remains elevated, any unexpectedly hawkish tone in the minutes could influence expectations for global monetary policy.
Among individual stocks, energy producers benefited from the surge in oil prices, with Shell (LSE:SHEL) rising 1.6% and BP (LSE:BP.) gaining 2.3%.
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