European stocks head lower on Middle East tensions

European stocks rose modestly on Tuesday on hopes of easing tensions in the Middle East, but worries about the economic fallout from the conflict left them on course for their sharpest monthly decline since 2022.

The pan-European Stoxx 600 index gained 0.6 per cent to 584.3 points, but was down 7.8 per cent in March. That puts it on course to end an eight-month run of gains and record its first quarterly decline in five quarters.

All major regional bourses advanced, though they too remained on track for monthly losses. Swiss equities rose about one per cent after an upgrade from UBS. UBS shares themselves gained three per cent on reports that capital rules could be eased.

The financial sector rose 1.3 per cent and was among the strongest performers. Energy stocks, though down 0.5 per cent on Tuesday, were the only sector to post gains for the month, up about 14 per cent in March as they continued to benefit from the sharp rise in oil prices.

Investor sentiment was lifted by reports that US President Donald Trump was willing to end the military campaign against Iran even if the Strait of Hormuz remained largely closed. Analysts, however, warned that similar bursts of optimism had faded quickly in recent weeks.

The conflict involving the US, Israel and Iran has disrupted oil supplies, driven up energy prices and worsened growth and inflation expectations in Europe. The Stoxx 600 is expected to end the quarter down about 1.3 per cent.

I can also turn it into a sharper Reuters-style market brief if you want a more publishable version.

(reuters, bak)