Europe stocks set to fall as US-Iran tensions fuel oil rebound

On Tuesday, Europe's major stock indices were poised to decline as tensions between the United States and Iran escalated, triggering a surge in oil prices and undermining optimism about a resolution to the ongoing conflict. The pan-European STOXX 600 index fell over 1%, while contracts tracking Germany's DAX and Spain's IBEX slipped by roughly 1% each by 0712 GMT.

The United States executed strikes on Iran's Qeshm Island in the Strait of Hormuz, according to a US official, following Iran's previous expression of willingness to engage in peace talks and President Donald Trump's suggestion that he might refrain from striking Tehran after the midterm elections. Brent crude prices surged by 1.6%, reaching over $100 per barrel, after rebounding from a 7% drop in the prior session.

Airlines, which have suffered significantly from the volatility in energy costs, are set to attract scrutiny, with German airline group Lufthansa announcing a revised profit outlook. Additionally, artificial intelligence (AI) stocks such as Aixtron, ASML, and Schneider Electric may face downward pressure following a decline in Asian equities earlier in the day.

Investors are reevaluating their positions in AI-related companies, given disappointing results from major US hyperscalers in the previous week and Apple's cautious guidance for gross margins in the critical holiday quarter, driven by escalating memory-chip costs. However, pharmaceuticals and agriculture giant Bayer is expected to lead the gains after raising its 2026 profit forecast.