European Stocks Lower

European stocks traded lower on Thursday, with the STOXX 50 and STOXX 600 both falling 0.8% as rising oil prices and escalating tensions in the Middle East weighed on sentiment. The US carried out strikes on Iran for a 12th consecutive day, while the Houthis claimed attacks on two Saudi oil tankers. Investors were also digesting a fresh round of corporate earnings while awaiting the ECB's monetary policy decision. BNP Paribas fell 1.2% despite reporting better-than-expected profit and revenue. UniCredit decreased 1.7% even after reporting a 6.6% yoy increase in revenues and saying it is aiming to acquire Commerzbank in Q4. Nestle tumbled more than 6%, after the company said it struck a deal to sell half of its waters business to private equity group Platinum Equity. In contrast, Total Energies added 1.8% after reporting its best quarterly profit in 3 years and Dassault Aviation jumped nearly 8% to top the STOXX 600 after reporting higher first-half earnings.

European equity markets were set to open lower on Thursday, halting a two-day winning streak as investors remained cautious amid escalating tensions in the Middle East and looked ahead to the European Central Bank's policy decision later today. Oil prices climbed to a fresh six-week high after President Trump warned of strikes on Iranian infrastructure if shipping through the Strait of Hormuz is attacked, while Iran vowed retaliation. Iran-backed Houthi militants also targeted two Saudi oil tankers in the Red Sea, fueling fears of broader supply disruptions. Meanwhile, the ECB is widely expected to keep interest rates unchanged as officials assess the fallout from the intensifying Middle East conflict. In corporate news, STMicroelectronics reported quarterly profit and sales guidance below expectations but projected revenue growth later this year on strong AI data center demand. In premarket trading, Euro Stoxx 50 and Stoxx 600 futures were down 0.3% and 0.2%, respectively.

European stocks closed firmly higher on Wednesday as strong earnings reports offset a deteriorating macroeconomic backdrop. The Euro STOXX 50 rose 0.5% to 6,319 and the STOXX Europe 600 gained 0.6% to 647. Santander jumped by 1.7% after it reported a 17% annual increase in underlying profit, supported by a higher client base after the takeover of UK lender TSB. Other banks were supported by result, with BBVA adding 2%, while Intesa Sanpaolo gained 1.3% and UniCredit rose 0.7% ahead of its earnings tomorrow. Meanwhile, Airbus surged 7% after upgrading its delivery targets and announcing a €5 billion share buyback programme. Meanwhile, sovereign yields remained near recent peaks as natural gas prices extended their surge. The ECB is due to maintain its rates unchanged tomorrow, although inflationary risks may drive the Governing Council to signal a hawkish outlook.