European Stocks Rise Despite Middle East Tensions as Investors Weigh Earnings

European stocks edged higher on Wednesday as investors continued to assess the impact of the escalating Middle East conflict while also digesting a fresh batch of corporate earnings.

By 03:05 ET (08:05 GMT), Germany’s DAX rose 0.6%, France’s CAC 40 gained 0.5%, and the UK’s FTSE 100 advanced 0.1%.

Middle East conflict remains in focus

Fighting between the United States, Israel, and Iran continued overnight. U.S. Admiral Brad Cooper, who leads American forces in the Middle East, said Iran’s air defenses had been severely weakened and that its navy had lost operational capacity on key waterways after 17 vessels were sunk. He also noted that more than 2,000 Iranian targets had been struck so far.

Israel also continued operations against the Hezbollah militant group in Lebanon, after the Iran-backed group launched attacks on Israel in response to the killing of Supreme Leader Ayatollah Ali Khamenei during the initial strikes.

Meanwhile, Iran expanded its retaliation by firing missiles and drones at Arab states hosting U.S. military bases, widening the conflict across the region.

Analysts at Vital Knowledge warned that soaring energy prices could soon become a major economic headwind.

“Energy prices have surged over the past few days, particularly European natural gas, and this is preventing bonds and yields from acting as stabilizers for markets,” they said. “If energy prices remain elevated, it will create significant pressure for global consumers.”

Still, analysts noted that some investors are beginning to consider the possibility that the campaign against Iran could eventually lead to a longer-term stabilization of the region, potentially supporting equities over time.

Corporate earnings in focus

Away from geopolitical tensions, European investors were also assessing several major corporate earnings updates.

• Bayer issued a 2026 earnings outlook below market expectations, as the German pharmaceutical group continues to grapple with costly legal cases and a heavy debt burden.
• Continental projected broadly stable sales and profitability in its tyre business for 2026 amid a volatile demand environment.
• Adidas said operating profit could rise to around €2.3 billion this year, despite a roughly €400 million hit from U.S. tariffs and currency pressures.
• SCOR reported stronger-than-expected fourth-quarter net income, supported by solid underwriting performance.
• Metro Bank posted £98 million in underlying pre-tax profit for 2025, the highest in its 15-year history, beating its cost reduction targets.
• Traton, the Volkswagen-owned truckmaker, proposed a dividend roughly half of last year’s level after reporting a sharp earnings drop driven by weakness in North America and tariff costs.

Economic data and inflation outlook

Investors are also awaiting Eurozone services PMI data for February and the region’s latest unemployment figures.

However, these releases are unlikely to significantly shift expectations for European Central Bank policy, particularly after data on Tuesday showed Eurozone inflation unexpectedly rising to 1.9%, up from 1.7% the previous month.

With energy prices climbing due to the Middle East conflict, inflation could rise further in the coming months.

Financial markets currently expect the ECB to keep its deposit rate at 2% in the near term, though the possibility of a rate hike later this year is beginning to enter the discussion.