Smoke rises after a strike in Tehran, Iran, Monday, March 2, 2026.
Mohsen Ganj | AP
LONDON – European stock markets fell sharply on Tuesday as escalating Middle East conflict continued to weigh on global investor sentiment.
By 1:10 p.m. London (8:10 a.m. ET), pan-European Stocks 600 fell 2.9%, extending Monday’s steep decline, with the index ending down 1.6%. Stocks across all sectors sold on Tuesday morning, with bank stocks down 4.2%, insurance stocks down 4.1% and utility stocks down 3.6%, leading to losses. Even the STOXX Aerospace and Defense Index, home to the region’s largest defense prime, fell 2.2% after ending Monday’s session in positive territory.
Travel and leisure stocks plunged 2.4% as airspace closures in the Middle East forced airlines around the world to cancel thousands of flights.
All major regional stock exchanges were trading in negative territory, with Germany’s dachshund and italian FTSE MIB Notch the steepest decline.
Global markets continue to decline as the conflict between the US and Iran engulfs the entire Gulf region. Overnight, Saudi Arabia’s Ministry of Defense announced that two drones had crashed into the US embassy in Riyadh.
Gold, seen as a safe haven during times of uncertainty, has soared as the market appears to be in a risk-off mood. Global stock markets remain under pressure, with US futures and Asian markets lower on Tuesday.
Global oil prices also rose on Monday on concerns that the conflict between the United States and Iran could disrupt oil infrastructure, push up fuel prices and increase inflation risks.
The Strait of Hormuz, the world’s most important oil shipping route, is closed and Iran intends to set fire to ships attempting to pass through the route, the commander of Iran’s Revolutionary Guards said, Reuters reported, citing Iranian media.
The conflict entered its fourth day on Tuesday, with no clear end in sight. On Monday, U.S. military leaders said more troops were heading to the region, and President Donald Trump said the war would last four to five weeks but could last “much longer than that.”
The European Union called for a calming of the situation, “utmost restraint” and protection of civilian lives.
Eurozone inflation rose to 1.9% in February from 1.7% in January, according to preliminary data from Eurostat on Tuesday morning. The interest rate remains slightly below the European Central Bank’s 2% target, but policymakers will be keeping an eye on potential changes in energy prices given the Iran conflict.
In corporate news, French defense giant Thales announced its full-year results on Tuesday, with order intake matching the record 25.3 billion euros ($29.41 billion) set in 2024.
Sales rose by 7.6% to 22.1 billion euros, exceeding expectations, and net profit rose 6% year-on-year to 2.0 billion euros. Thales’ Aerospace and Defense division helped drive growth, with the company saying it had secured 28 major orders in 2025 worth a total of €7.75 billion.
Paris-listed Thales shares were last trading 1.6% lower amid a sell-off in European defense stocks.
Elsewhere, UK investment managers aberdeen announced on Tuesday that its full-year operating profit for 2025 will be in line with market expectations, after assets under management rose 9% from a year earlier to 556 billion pounds ($739 billion). The stock last traded 8.3% lower.
Citi analysts said in a note Tuesday morning that Aberdeen is delaying a return to capital inflows into its advisory division until 2027, and said its new guidance for a 5-10% annual increase in net capital generation is “well below consensus.”
