European stock markets sought to find a clear direction on Tuesday, following an easing of tensions in the Middle East, as investors braced for the European Central Bank's interest rate decision later this week.
By 10:04 a.m., the pan-European STOXX 600 index was virtually unchanged, while Germany’s DAX was down 0.1%, France’s CAC 40 was flat, and Britain’s FTSE 100 was down 0.4%.
Both Iran and Israel have announced a halt to the escalation of attacks between them, easing some concerns about the possibility of US President Donald Trump succeeding in reaching a peace agreement with Tehran.
However, the Strait of Hormuz, the vital waterway through which one-fifth of the world’s oil and liquefied natural gas supplies pass, remains almost completely closed to oil tanker traffic, while Trump has confirmed that the US embargo on Iranian ports will remain in place.
Brent crude oil futures, the global benchmark for oil prices, fell by 1.0%, but remain significantly higher than before the outbreak of the war. Eurozone government bond yields, which tend to move inversely to bond prices, also declined.
Concerns have grown that the sharp rise in energy prices could spark a wave of inflation, potentially prompting global central banks to raise interest rates in response.
The European Central Bank is widely expected to raise interest rates on Thursday, as policymakers prioritize curbing inflationary pressures over signs of an economic slowdown in the 21-nation eurozone. In the United States, investors are also anticipating a Federal Reserve rate hike before the end of the year, a bet bolstered by last week's strong May jobs report.
Aside from the war with Iran, shares of GlaxoSmithKline (GSK) fell 2.1% after the pharmaceutical company announced its agreement to acquire cancer treatment group Nuvalent for $10.60 billion. This deal is expected to give GSK access to three drug candidates for lung cancer treatment.
