LONDON — European stocks finished sharply lower on Tuesday, as the intensifying conflict in the Middle East continued to weigh on global investor sentiment.
The pan-European Stoxx 600 ended Tuesday's session 3.2% lower, extending Monday's losses that saw the index close down 1.6%.
Stocks across sectors sold off, with banking stocks down 4.3%, insurance stocks down 3.6% and utilities stocks down 4.4%. Even the Stoxx Aerospace and Defense index, home to the region's biggest defense primes, finished almost 3% lower after ending Monday's session in positive territory.
Travel and leisure stocks plummeted 2% as airspace closures in the Middle East forced airlines across the globe to cancel thousands of flights.
All major regional bourses traded in negative territory, with Germany's DAX and Italy's FTSE MIB notching the sharpest declines.
It comes as markets around the world continue to slide as the conflict between the U.S. and Iran engulfs the wider Gulf region. It's led to a risk-off mood in markets, with gold, considered a safe-haven during times of uncertainty, surging, and U.S. and Asian equities falling.
Global crude oil prices also soared for the second day on worries that the U.S.-Iran conflict could disrupt oil infrastructure and push up fuel prices, adding inflationary risks.
An Iranian Revolutionary Guard commander said the Strait of Hormuz — the world's most vital transit route for crude oil — is closed and that Iran would set ablaze ships attempting the route, Reuters reported, citing Iranian media.
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The conflict is now in its fourth day, with no clear endpoint. On Monday, U.S. military leaders said more forces were headed to the region, and President Donald Trump said the war would last four to five weeks, but that it could go on "far longer than that."
The European Union has called for de-escalation of the situation and for "maximum restraint," and for the protection of civilian life.
Inflation data, stock movers
Meanwhile, flash data from Eurostat on Tuesday morning showed inflation in the euro zone rose to 1.9% in February, up from 1.7% in January. While the rate remains a touch below the European Central Bank's 2% target, policymakers will be keeping an eye on potential energy price volatility given the conflict in Iran.
In corporate news, French defense giant Thales reported its full-year earnings on Tuesday, with orders matching the record 25.3 billion euros ($29.41 billion) set in 2024.
Sales jumped 7.6% to a stronger-than-expected 22.1 billion euros, while net profit rose 6% year-on-year to reach 2 billion euros. Thales' aerospace and defense divisions helped drive the growth, with the company noting it secured 28 large orders with a collective value of 7.75 billion euros in 2025.
Paris-listed Thales stock closed 2.4% lower amid the broader sell-off of European defense stocks.
Elsewhere, British investment manager Aberdeen said Tuesday that it expected its full-year 2025 operating profit to be in line with market expectations, after its assets under management jumped 9% from the previous year to £556 billion ($739 billion). Its share price had plummeted 10.5% by the end of the day.
In a note Tuesday morning, analysts at Citi pointed to Aberdeen postponing the recovery of flows into its Adviser unit to 2027, and said new guidance for 5% to 10% annual growth in net capital generation was "well-below consensus."