European stocks close higher as Iran war concerns weigh on sentiment

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A trading floor manager works on the floor of the American Stock Exchange (AMEX) at the New York Stock Exchange (NYSE) in New York, US, on Monday, May 4, 2026.

Michael Nagle | Bloomberg | Getty Images

LONDON — European stocks closed higher on Tuesday, as investors digested the latest developments in the Iran war.

The pan-European Stoxx 600 closed the session almost 0.7% higher, with most sectors finishing in the green. Major bourses in Frankfurt, Paris and Milan made gains, though the U.K.'s FTSE 100 bucked the wider positive trend, falling 1.4%.

Global markets were shaken on Monday as a fragile ceasefire between the U.S. and Iran appeared to be close to collapse as the United Arab Emirates came under attack from Iranian drones and missiles, and the U.S. said it sank Iranian boats in the Strait of Hormuz.

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U.S. President Donald Trump, in a Fox News interview later Monday, warned Iran that it will be “blown off the face of the earth” if it targets U.S. ships that are protecting commercial vessels transiting the strait.

Trump also said in a Truth Social post that a South Korean cargo ship had come under fire from Iran in the waterway. “Perhaps it’s time for South Korea to come and join the mission!” Trump wrote in the post.

Stock market indices closed sharply lower and oil prices rose Monday amid fears that the war could continue for much longer than expected, potentially causing a global recession. Oil prices declined overnight.

In corporate news, telecoms giant Vodafone said Tuesday it would take full ownership of its VodafoneThree joint venture, after agreeing a buyout of Hong Kong conglomerate CK Hutchinson’s stake. The deal, worth £4.3 billion ($5.81 billion), will see Vodafone become the sole owner of the U.K.'s biggest mobile operator.

Shares of Vodafone closed 2.2% lower.

Elsewhere, Italian lender Unicredit published its first-quarter earnings on Tuesday morning, reporting its 21st quarter of profitable growth and its best quarter on record. Quarterly net profit grew 16.1% year-on-year to 3.2 billion euros ($3.74 billion), well above the 2.8 billion euros expected by analysts polled by LSEG.The bank, which is making a controversial bid to take over German lender Commerzbank**, **hiked its guidance on Tuesday, saying it was aiming for a full-year net profit of at least 11 billion euros in 2026.

The bank’s Milan-listed shares ended almost 5.9% higher.

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Europe Early Edition

German defense mainstay Rheinmetall’s stock ended 3.4% higher**,** following the release of the company’s first-quarter earnings after the closing bell on Monday. Quarterly revenue jumped 7.7% year-on-year to reach 1.94 billion euros, falling short of the market expectation of 2.3 billion euros. Rheinmetall said it expects growth in the first half of this year to follow a similar trajectory to the previous year, when first-half cumulative revenue jumped 37% year-on-year.

Earlier Tuesday, Europe’s largest lender HSBC reported first-quarter pretax profit of $9.4 billion, marginally missing analysts’ estimates.

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UniCredit boss plots Commerzbank shake-up as lender continues its takeover pursuit of German rival

— CNBC’s Kevin Breuninger contributed to this market report.

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