LONDON — European stocks closed lower on Wednesday as the market fallout of the Iran war remained in the spotlight ahead of the U.S. Federal Reserve's next policy move.
The pan-European Stoxx 600 finished the session down 0.7%, reversing earlier gains, with most sectors and all major bourses closing in negative territory.
In corporate news, shares of British firm Diploma — a distributor of technical fastenings to the aerospace, life sciences and motorsport sectors — finished 17.8% higher to reach a new 52-week high. It came after the FTSE 100 constituent announced a significant upgrade to its full-year outlook. The firm said it now expects organic revenue growth of 9%, up from 6%, with analyst consensus on operating profit rising by 13%.
Shares of FTSE 250 IT firm Softcat closed 9.2% higher after the company reported its fiscal half-year results, touting an "exceptional" performance and hiked its guidance for the full-year.
Softcat said it now expects high single-digit growth in underlying operating profit, up from a previous forecast of low single-digit growth. Underlying operating profit in the six months to Jan. 31 rose by 27.3% year-on-year, which the company attributed to "successful execution and strategic progress."
Oil prices rose Wednesday, with Brent crude, the international benchmark, last seen 4.8% higher at $108.41 per barrel. The U.S. West Texas Intermediate price reached $97.97, a 1.8% gain.
President Donald Trump this week lambasted NATO allies for refusing to assist with efforts to protect ships attempting to travel through the Strait of Hormuz, but said in a Truth Social post on Tuesday that the U.S. did not need help.
Investors are now looking ahead to the Fed's interest rate decision expected later on Wednesday. Markets are expecting the central bank to keep interest rates unchanged in a range between 3.5% to 3.75%.
Traders will be watching for any guidance from Fed Chair Jerome Powell on whether oil prices could impact future monetary policy decisions.
The Bureau of Labor Statistics' U.S. Producer Price Index, which provides a snapshot of wholesale inflation, unexpectedly jumped in February, rising 0.7% month-over-month, outweighing expectations of a 0.3% increase.
Yields on U.K. 2-year Gilts rose 6 basis points to 4.113%, while yields on 10-year Gilts, the benchmark for U.K. government borrowing, were last seen 4 basis points higher at 4.735%. Yields on German 2-Year Bunds also rose earlier in the session following the PPI data release.
In Europe, investors are looking ahead to EU inflation data due later in the session. It comes ahead of monetary policy decisions from the European Central Bank, Bank of England, Riksbank and Swiss National Bank on Thursday.
On Wednesday, earnings come from Tencent, Munich Re, and Eni.
— CNBC's Pia Singh and Lee Ying Shan contributed to this market report.