European stock markets decline as US-Iran negotiations reach a deadlock

Investing.com - European stock markets opened lower on Tuesday, with few signs of a lasting peace agreement between the United States and Iran, suppressing market sentiment.

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At 3:04 a.m. Eastern Time (7:04 a.m. GMT), the pan-European STOXX 600 index fell 1.2%, the German DAX index slid 1.4%, the UK FTSE 100 index dropped 1.1%, and the French CAC 40 index fell 1.1%.

Market sentiment was shaken, partly due to remarks U.S. President Trump made to reporters on Monday. He said that the fragile ceasefire agreement between Washington and Tehran is in a “highly dangerous” state.

Previously, Trump refused to accept Iran’s response to the U.S. ceasefire proposal, initially labeling it “unacceptable,” and then more sharply calling it “a bunch of trash.”

Iran, meanwhile, insisted that its counter-proposal is “generous and responsible,” with the main focus of negotiations centered on reopening the Strait of Hormuz. This narrow waterway located off Iran’s southern coastal area has been effectively closed for several weeks, severely hindering the flow of global oil supplies and raising widespread concerns about a global energy crisis.

Felix Vezina-Poirier (phonetic), chief strategist at BCA Research, noted in a report: “The Middle East situation has once again become the market focus since last weekend, and prospects for the Hormuz shipping to return to normal now appear to have been delayed.”

Oil prices continued to rise. Global benchmark Brent crude oil futures were up 2.0% to $106.30 per barrel, far above the pre-war level of about $70 per barrel. The increase in oil prices further intensified market concerns about a surge in inflation and led to expectations that major central banks will respond with rate hikes.

European government bond yields (which typically move inversely to bond prices) also rose, adding additional downward pressure on stock markets across Europe.

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