European shares flat as US strikes on Iran dampen peace deal hopes

European shares were subdued on Tuesday as expectations for an imminent end to the Middle East conflict waned after the U.S. launched fresh attacks on Iran.

The pan-European STOXX 600 was flat at 631.92 points by 0707 GMT.

On Monday, the index closed at its highest since February 27 - before the conflict started - and came within 1% of notching an all-time high on hopes that peace in the region could be near.

However, the latest attacks and U.S. Secretary of State Marco Rubio's remarks that negotiating a deal with Iran could "take a few days," tempered those expectations and markets looked for any clues that tensions could escalate further.

Brent crude prices rose 2%, stoking inflation worries as the euro zone is heavily reliant on oil imports through the Strait of Hormuz.

Energy-price-sensitive airlines such as Lufthansa and Ryan Air lost 1.3% each.

Morgan Stanley also downgraded the German airline.

Among other movers, Ferrari lost 7% after the luxury sports car-maker unveiled its first fully electric car, at a time when competitors including Porsche and Lamborghini are scaling back their EV ambitions, citing weak demand.

The stock was on track for its biggest daily loss since October and weighed on the automobiles and parts sector that fell 2%. Most other sectors were mixed.

(Reporting by Johann M Cherian in Bengaluru; Editing by Eileen Soreng)

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This story was originally published May 26, 2026 at 3:21 AM.