European Stocks Fall as Germany Slashes Growth Forecast Amid Iran War and Energy Shock Fears

European stocks closed lower on Wednesday as investors weighed fresh economic warnings from Germany, ongoing geopolitical tension linked to the Iran conflict, and a wave of corporate earnings. The pan-European Stoxx 600 ended the session down 0.4%, giving up earlier gains as most sectors and major indices turned negative.

Sentiment weakened after Germany sharply cut its economic growth forecast for 2026, now expecting GDP to expand by just 0.5%, down from earlier projections. Officials also lowered the 2027 outlook to 0.9%, pointing to rising energy costs, global instability, and disruptions linked to the Middle East conflict, including concerns over the Strait of Hormuz. Inflation is now expected to reach 2.7% this year and 2.8% next year.

Geopolitical tensions remained a key driver for markets after U.S. President Donald Trump extended a ceasefire deadline involving Iran, saying the country’s leadership was “seriously fractured” and needed to present a unified peace proposal. However, diplomatic progress appeared uncertain as reports suggested Iranian officials refused further negotiations under pressure, insisting that U.S. blockades must be lifted before talks resume.

The economic ripple effects of the conflict are also being felt in Europe. In the U.K., inflation rose to 3.3% in March, driven largely by higher fuel prices. Economists warn that continued instability could push inflation above 4% in the coming months, with rising food and energy costs squeezing households and businesses further.

Despite the broader downturn, some corporate earnings provided bright spots. Dutch chip equipment maker ASMI stood out, with shares jumping over 7% after reporting strong first-quarter revenue and record operating margins, offering a rare positive signal in an otherwise cautious European market environment.

source: cnbc