European stocks slip toward longest losing streak since 2025 on war risks

European stocks continued their downward trajectory on Tuesday, reaching two-week lows as tensions in the Middle East escalated. The Stoxx Europe 600 Index slipped 0.2%, marking its lowest level since August 5, and threatening to set a record for the longest daily losing streak since November 2025. Germany's DAX fell 0.4%, while France's CAC 40 and London's FTSE 100 were down slightly.

The situation worsened after Iran announced a full offensive military posture, abandoning defensive constraints in the face of a termination of the temporary ceasefire agreement. This decision came as tensions in the Persian Gulf intensified and the U.S. administration threatened naval enforcement. The shift to an offensive stance heightened concerns of direct strikes on vital energy infrastructure and maritime routes, eroding hopes for diplomatic resolution and spiking risk premiums across global markets.

Energy prices surged, threatening to reignite inflationary pressures, and fixed-income and equity traders worried that the energy shock might hinder central banks' ability to implement monetary easing later this autumn. Despite a strong reporting season in June and July, this positive corporate guidance had dissipated by the time Q2 ended, leaving the market exposed to macroeconomic shocks and reliant on geopolitical headlines.