European Stocks Slide as Iran War Escalation Sends Oil Higher

European stocks extended their decline on Tuesday, with major benchmarks falling to two-week lows as a sharp escalation in the Iran war rattled global financial markets.

The pan-European STOXX Europe 600 fell 0.2%, marking its sixth consecutive session of losses and reaching its lowest level since August 5. If the decline holds at the close, it would be the index’s longest losing streak since November 2025. Germany’s DAX dropped 0.4%, while France’s CAC 40 and the UK’s FTSE 100 were little changed.

Market sentiment deteriorated after Reuters reported that Iran had shifted toward a fully offensive military posture following the collapse of negotiations aimed at securing a permanent end to the conflict. Tehran reportedly abandoned defensive restrictions after Washington rejected an extension of a temporary ceasefire framework.

The escalation has increased fears of attacks on regional energy infrastructure and key maritime routes in the Persian Gulf, raising geopolitical risk across global markets.

Oil prices also surged. Brent crude futures climbed 0.8% to $91.49 a barrel, reaching their highest level since July 30. Higher energy prices are raising concerns about renewed inflation across Europe and could make it harder for central banks to cut interest rates later this year.

Meanwhile, the European earnings season is losing momentum. Strong bank profits, resilient luxury companies and better-than-expected energy results had previously supported the STOXX 600’s rally.

With most second-quarter earnings now reported, investors have fewer corporate catalysts to offset geopolitical risks. As a result, European equities are becoming increasingly sensitive to developments in the Middle East, oil prices and broader economic uncertainty.