European stocks traded lower on Wednesday, with the STOXX 50 and STOXX 600 both falling 0.7%, as renewed tensions in the Middle East weighed on investor sentiment.
The US launched fresh strikes against Iran and revoked a waiver that had allowed new purchases of Iranian oil, pushing oil prices higher and raising concerns over the inflation and interest rate outlook.
As a result, markets increased their expectations for ECB tightening, with implied rate hikes rising to around 32 basis points from 25 basis points the previous day.
Most sectors traded in negative territory.
Among the biggest companies, AstraZeneca (-1.1%), Nestle (-0.8%), Hermes (-1.8%), SAP (-2.0%), and Banco Santander (-2.0%) were in the red.
Energy stocks, however, outperformed on the back of stronger crude prices, with Shell (+0.7%), TotalEnergies (+1.6%), and BP (+1.8%) posting gains.