European shares dip as Middle East caution lingers

European markets edged lower as investors remained cautious over inflation risks tied to the Iran conflict and uncertainty surrounding U.S.-Iran negotiations. Rising oil prices and expectations of further ECB rate hikes continued to weigh on sentiment.

May 20, 2026

Reuters

European shares dip as Middle East caution lingers

FILE PHOTO: European Union flags flutter outside the EU Commission headquarters, on the day farmers protest against proposed cuts to Common Agricultural Policy (CAP) funding and the European Commission's plan to merge agricultural and cohesion policies, in Brussels, Belgium July 16, 2025.

Yves Herman/Reuters

European shares edged lower on Wednesday as investors remained cautious with war-driven inflation fears pressurising bonds, while markets kept a close watch on U.S.-Iran negotiations.

The pan-European STOXX 600 .STOXX dipped 0.2% to 610.37 points, as of 0701 GMT. Other regional bourses were also lower with Germany's DAX .GDAXI and France's CAC 40 .FCHI down 0.2% each.

President Donald Trump said on Tuesday the war would be over "very quickly", while Vice President JD Vance talked up progress in talks with Tehran about an agreement to end hostilities.

Brent crude was at about $110 a barrel, while bonds remained under pressure as money markets anticipate at least two rate hikes from the European Central Bank before the end of the year.

Meanwhile, the European Union stuck a provisional agreement to remove import duties on U.S. goods, as part of a trade deal with Washington last July, and before Trump's deadline of July 4 when he threatened to hike tariffs if the deal was not implemented.

In early trade, Euronext ENX.PA advanced 4.3% after reporting first-quarter earnings above market expectations.

Marks & Spencer MKS.L rose 5% after forecasting profit growth for the next year after annual profit slid due to a cyber hack disruption.

-Reporting by Twesha Dikshit; Editing by Eileen Soreng/Reuters