European stock markets fell sharply on Tuesday, pressured by mounting concerns over the expanding conflict in the Middle East and its impact on global risk appetite.
By 08:05 GMT, Germany’s DAX had dropped 1.9%, France’s CAC 40 was down 1.2%, and the UK’s FTSE 100 declined 1%.
Escalation in the Gulf
Investor sentiment has deteriorated as hostilities between the U.S. and Iran, which erupted over the weekend, show signs of spreading across the wider Gulf region.
Reports suggested that the U.S. embassy in Riyadh was targeted by missile fire, while Amazon data centres in the UAE and Bahrain were also struck, as Iran launched retaliatory attacks across multiple Middle Eastern countries.
The developments have cast fresh doubt on the long-held perception of Gulf hubs such as Dubai as safe havens.
At the same time, Israel said it was conducting operations against both Iran and Lebanon, after the Tehran-backed Hezbollah group launched missiles and drones toward Tel Aviv.
The U.S. State Department announced on Tuesday that non-essential U.S. government staff and family members had been ordered to leave Bahrain, Iraq and Jordan.
U.S. President Donald Trump said overnight that Washington would do “whatever it takes” to accomplish its military objectives, indicating that operations could continue for several weeks.
Earnings remain in focus
Despite geopolitical tensions dominating headlines, investors are also assessing a fresh batch of corporate results.
Thales (EU:HO) delivered fourth-quarter figures ahead of expectations, supported by robust performance in its Aerospace and Defence divisions, though its Cyber & Digital segment remained subdued.
Swiss packaging firm SIG Group reported a loss for 2025 after booking €350.7 million in one-off charges related to a strategic review, while revenue remained broadly flat in a weak market environment.
Kuehne & Nagel (TG:KNIA) posted a 24.8% decline in annual profit for 2025, citing currency headwinds and margin pressure. The Swiss logistics group’s equity ratio fell to 18.5%, compared with 27.8% the previous year.
Lottomatica (BIT:LTMC) exceeded expectations for 2025, reporting 21% profit growth as the Italian gaming operator expanded its online market share.
Inflation data awaited
Markets are also looking ahead to the release of Eurozone flash inflation data for February later in the session, particularly given the renewed rise in energy prices.
Annual headline inflation is forecast at 1.7%, unchanged from January, while core inflation — which excludes food and energy — is expected at 2.2% year-on-year.
Oil prices extend rally
Crude prices surged further on Tuesday, building on the previous session’s sharp gains, as concerns over potential disruptions to shipments through the Strait of Hormuz intensified.
Brent futures jumped 4.3% to $81.10 per barrel, while U.S. West Texas Intermediate crude advanced 4% to $74.05 per barrel.
Both benchmarks had already closed more than 7% higher on Monday after spiking as much as 13% to one-year highs.
Tensions escalated after Iranian officials threatened to target any vessel attempting to transit the Strait of Hormuz, raising fears of significant disruptions to oil exports from major Gulf producers.
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