European stocks retreated on Tuesday as investor sentiment weakened amid growing uncertainty over peace talks between the United States and Iran, just hours before a ceasefire deadline expired.
Donald Trump signaled a tougher stance, saying he did not intend to extend the ceasefire and that US forces were fully prepared to act if negotiations collapsed.
Pakistan, which is mediating between the two sides, said it was still awaiting confirmation from Iran on whether its delegation would attend the talks in Islamabad.
The pan-European STOXX Europe 600 index closed down 0.9 percent at 616.03 points. Major markets followed suit, with France’s CAC 40 and Britain’s FTSE 100 each dropping 1.1 percent, while Germany’s DAX slipped 0.6 percent.
Data from the ZEW Institute showed German investor confidence fell in April to its lowest level in more than three years.
Ongoing concerns over potential disruptions to oil supplies continued to weigh on Europe’s energy-dependent economies, with several companies flagging conflict-related risks in their earnings reports.
According to Chris Beauchamp of IG Group, rising geopolitical tensions could fuel inflationary pressures, potentially prompting the European Central Bank to tighten monetary policy.
Oil prices rose 3 percent, lifting the energy sector by 0.4 percent. However, losses were led by the aerospace and defense sector, which dropped 4.8 percent—its steepest decline since April 2025.
Shares in Thales fell 6 percent after weaker-than-expected quarterly sales, while Safran and Rolls-Royce both slid more than 6.5 percent.
Healthcare stocks also came under pressure, with Novo Nordisk dropping 4.2 percent, and AstraZeneca and GlaxoSmithKline each losing over 2.5 percent.
The food and beverage sector declined 1.8 percent after shares in Royal Unibrew plunged 24.8 percent following the announcement that its partnership with PepsiCo in Northern Europe would end.
Meanwhile, data from the London Stock Exchange Group showed markets are pricing in an 84 percent probability that the European Central Bank will keep interest rates unchanged at its upcoming meeting.
