European stocks opened slightly lower on Wednesday, while oil prices and government bond yields rose following fresh missile strikes that weakened prospects for an imminent deal to end the war with Iran.
By 10:10 a.m., the pan-European STOXX 600 index was down 0.2%, Germany’s DAX was down 0.7%, France’s CAC 40 was down 0.4%, while Britain’s FTSE 100 was largely flat.
Reuters reported that the US military announced that Iranian drone attacks on Kuwait, Bahrain, and other targets had been thwarted or failed. Meanwhile, Iranian state media indicated that the Islamic Revolutionary Guard Corps targeted the US Fifth Fleet headquarters in Bahrain in retaliation for a US attack on a communications tower south of Qeshm, according to the same agency.
Oil prices rose on concerns that negotiations between Washington and Tehran aimed at reaching a peace agreement to end the more than three-month-long war and reopen the Strait of Hormuz could falter. Brent crude, the global benchmark, rose 1.7% to $97.67 a barrel.
In this context, Eurozone government bond yields have risen, putting downward pressure on regional stocks. Investors now see a greater than 50% probability that the European Central Bank, keen to curb inflation driven by rising energy prices, will raise interest rates three times by the end of 2026, according to Reuters.
The yield on Germany's two-year bond, which is sensitive to interest rate changes, rose by 3 basis points to 2.654%, while the yield on the benchmark 10-year bond increased by 2.50 basis points to 3.00%. Yields also rose in France, Italy, and Spain, although yields typically move inversely to bond prices.
On the individual stock level, shares of airlines Air France and Lufthansa fell under the weight of renewed increases in energy costs.
In contrast, shares of Inditex, owner of the Zara brand, advanced after the Spanish retail giant gave a positive assessment of its business at the start of the summer season.
