European Stocks Fall as War Escalation Undermines Cease‑Fire Hopes

European equity markets opened lower on Thursday as optimism over a near‑term cease‑fire in the ongoing conflict with Iran was dashed, prompting a sharp rebound in oil prices and renewed investor caution.

The pan‑European Stoxx 600 declined about 1.2% in early trade, with key bourses such as Germany’s DAX and France’s CAC 40 slipping around 1.5% and 1.2% respectively, while the U.K.’s FTSE 100 eased by roughly 0.7%. This reversed an earlier two‑day rally that had lifted European benchmarks on hopes of de‑escalation.

The sell‑off followed remarks from Donald Trump, who signaled a continuation and intensification of military operations in Iran without providing a clear path to a diplomatic resolution, effectively ending cease‑fire speculation. Major oil benchmarks climbed sharply, with Brent crude futures rising above $107 per barrel as supply disruption fears intensified.

The energy and aviation sectors are already feeling the impact. Oil companies are pursuing new supply agreements to offset Middle East uncertainty, while European carriers face rising jet fuel costs and potential supply tightening ahead of the summer travel season. Analysts warn that sustained high fuel prices could dampen economic activity and consumer demand in the months ahead.

Precious metals also reacted to the market shift. Gold gave back some recent gains after rising on earlier optimism, while silver prices slipped, reflecting a renewed risk‑off sentiment among investors.