European stocks slip as lack of progress on US-Iran peace lifts oil

European stock markets fell on Wednesday as oil prices climbed to over $100 a barrel, leading to higher government bond yields. The pan-European STOXX 600 index ended 0.4% lower, reversing earlier gains. Major regional bourses also experienced losses. Brent crude futures rose over 1%, hitting above the $100 mark after five consecutive sessions of decline.

Iran's President Masoud Pezeshkian stated that Tehran would not yield to the US, following US President Donald Trump's threat to "annihilate" Iran at the UN General Assembly. The yields on Germany's 10-year bond and the US 10-year Treasury both surged, reaching their highest levels since 2007. Steve Sosnick, chief market analyst at Interactive Brokers, noted that while there was hope for dialogue to end the conflict, progress seemed lacking.

Most sectors on the STOXX 600 declined, except energy shares, which rose 1.3%. Bank stocks fell by 0.4%, while insurance and construction and materials sectors were the biggest decliners, down 1.7% and 1.3% respectively. The market's reaction follows a sharp rally in global markets earlier in the week, with the STOXX 600 still 0.8% higher for the week despite three weeks of declines.

Meanwhile, a survey by S&P Global showed euro zone business activity accelerated to its fastest pace in over three years, surprising expectations for a slowdown. Traders are also anticipating a meeting between US President Donald Trump and Chinese President Xi Jinping, which could provide insights into trade relations and the global economic outlook.

Individual stocks performed differently, with Arcadis falling 2.9% after WSP Global dropped its takeover bid, KWS declining 9% due to lower sales, and Adyen slipping 4.7% after naming a new CFO.