European stock markets opened the trading day in negative territory on Tuesday, as signs that the United States and Iran are close to a lasting agreement remained elusive.
By 03:04 ET (07:04 GMT), the pan-European Stoxx 600 had dropped 1.2%. Germany's Dax was down 1.4%, the United Kingdom's FTSE 100 had fallen 1.1% and France's CAC 40 slid 1.1%.
Sentiment soured following comments from U.S. President Donald Trump on Monday, in which he said a delicate ceasefire between Washington and Tehran was on "massive life support." Trump described Iran's reply to a U.S. proposal aimed at ending the fighting as "unacceptable" and later referred to it as a "piece of garbage."
Iran, however, characterized its counteroffer as "generous and responsible," with much of the negotiation attention focused on the potential reopening of the Strait of Hormuz. That narrow passage off Iran's southern coast has been effectively closed for several weeks, reducing global oil flows and stoking fears of a broader energy squeeze.
"The Middle East returned to the headlines over the weekend, and any normalization of Hormuz shipping now looks delayed," said Felix Vezina-Poirier, Chief Strategist at BCA Research, in a note.
Oil prices continued to move higher amid the uncertainty. Brent crude futures were last up 2.0% at $106.30 a barrel, a level described in market comments as well above pre-war prices of around $70 a barrel. Rising crude benchmarks have amplified worries about an acceleration in inflation and strengthened expectations that central banks could respond with interest rate increases.
European government bond yields, which typically rise when bond prices fall, moved higher on Tuesday. The increase in yields added further downward pressure on continental equities as investors reassessed valuations in the context of higher rates and an elevated oil price backdrop.
Summary prepared for market participants: European equities fell at the opening as geopolitical tensions and a rebound in oil combined with higher government bond yields to sap risk appetite.