European equities opened sharply lower on Tuesday as the intensifying conflict in the Middle East continued to unsettle global investor confidence.
By 9:35 a.m. in London (4:35 a.m. ET), the pan-European Stoxx 600 index had dropped 2.7%, extending the steep losses from Monday when it closed down 1.6%. Stocks across multiple sectors sold off, with banks down 3.8%, insurers down 4.2%, and mining companies falling 3.9%, leading the declines. Even the Stoxx Aerospace and Defense index, which houses the region’s largest defense contractors, fell 2.5% after finishing Monday in positive territory.
Travel and leisure shares fell 2.8% as airspace restrictions in the Middle East forced airlines worldwide to cancel thousands of flights.
All major European bourses were in negative territory, with Germany’s DAX and Italy’s FTSE MIB recording some of the sharpest drops.
Global markets continued to retreat as tensions between the U.S. and Iran spread across the Gulf region. Overnight, Saudi Arabia’s defense ministry reported that two drones struck the U.S. embassy in Riyadh.
Investors moved toward safer assets, with gold prices climbing amid heightened uncertainty. Equities worldwide remained under pressure, with U.S. futures and Asian markets also trading lower on Tuesday.
Crude oil prices jumped on Monday amid concerns that the U.S.-Iran confrontation could disrupt energy infrastructure and push fuel costs higher, raising inflation risks.
An Iranian Revolutionary Guard commander declared that the Strait of Hormuz the world’s key crude oil shipping lane was closed and warned that ships attempting passage would be set on fire, according to Reuters citing Iranian media.
The conflict entered its fourth day on Tuesday without a clear resolution. U.S. military officials said additional forces were being deployed to the region, and President Donald Trump indicated that the conflict could last four to five weeks, though potentially “far longer than that.”
The European Union urged all parties to de-escalate tensions, exercise “maximum restraint,” and safeguard civilian lives.
In corporate news, French defense company Thales reported its full-year earnings on Tuesday, with new orders matching the record €25.3 billion ($29.41 billion) achieved in 2024.
Revenue rose 7.6% to €22.1 billion, surpassing expectations, while net profit increased 6% year-on-year to €2 billion. Growth was largely driven by the aerospace and defense divisions, which secured 28 major contracts valued at €7.75 billion in 2025.
Shares of Thales, listed in Paris, were down 1.4% amid the wider sell-off of European defense stocks.
Separately, British investment manager Aberdeen projected its full-year 2025 operating profit would meet market expectations after its assets under management grew 9% year-on-year to £556 billion ($739 billion). Shares fell 8% in trading.
Analysts at Citi noted on Tuesday that Aberdeen had delayed the recovery of inflows into its Adviser unit until 2027, and the company’s new guidance of 5%–10% annual growth in net capital generation was considered “well below consensus.”