European Stocks Slip as Iran Tensions Offset Strong Eurozone Data

European stocks reversed early gains on Wednesday as renewed tensions involving Iran weighed on investor sentiment, overshadowing stronger-than-expected Eurozone economic data and temporary relief in crude oil prices.

The pan-European STOXX 600 fell 0.2% after climbing as much as 0.4% earlier, when it approached a two-week high. Germany’s DAX dropped 0.5% as industrial stocks weakened, while France’s CAC 40 erased a 0.5% advance. Britain’s FTSE 100 remained slightly higher, gaining 0.1% with support from aerospace and defense shares.

Market sentiment deteriorated after Iran’s General Staff responded to U.S. President Donald Trump’s remarks at the United Nations General Assembly. According to Al Jazeera, citing Mehr News Agency, Iran’s military warned it was prepared to launch more severe and unpredictable strikes against U.S. and Israeli targets if further attacks occur.

The geopolitical concerns overshadowed encouraging Eurozone economic figures. Flash Purchasing Managers’ Index data showed private-sector activity expanding at its fastest pace in more than three years, outperforming expectations for a sharp slowdown.

However, the stronger economic performance also reinforced expectations that the European Central Bank could maintain restrictive monetary policy or pursue additional interest rate hikes. Persistent input-price pressures and concerns about energy-driven inflation remain key risks, particularly with European natural gas storage levels reportedly running 12 percentage points below historical averages.

Earlier optimism had been supported by Saudi Arabia restarting its 1,200-kilometer East-West oil pipeline following drone-related damage, easing some concerns about regional energy supplies.

Among individual European stocks, a German seed producer fell 8% after annual sales missed forecasts amid reduced sugarbeet and corn acreage. Arcadis shares dropped 7% after Canadian engineering group WSP Global withdrew its takeover proposal.

Investors are also closely watching Chinese President Xi Jinping’s arrival in Washington for talks with Trump, with geopolitical developments continuing to drive volatility across European equities, currencies and energy markets.