Key Takeaways

• Mixed open: The Stoxx 600 was mostly unchanged, Germany’s DAX dipped 0.1%, France’s CAC 40 held flat, and the U.K.’s FTSE 100 fell 0.4%.
• Israel-Iran ceasefire holds for now: Both sides halted their flare-up of attacks, easing some concern over peace deal prospects.
• But Hormuz remains blocked: The vital waterway for a fifth of the world’s oil and LNG is still all but shuttered to tanker traffic.
• Blockade stays: Trump vowed to keep the American blockade of Iranian ports in place.
• Brent eases 1%: Oil retreated but remains well above pre-war levels.
• Eurozone yields drop: Bond yields fell on the slight improvement in risk sentiment.
• ECB rate hike Thursday: The central bank is widely expected to raise rates as policymakers prioritize inflation over sputtering Eurozone growth.
• Fed hike also anticipated: Strong May jobs data cemented bets on a U.S. rate increase before year-end.
• GSK drops 2.1%: The drugmaker agreed to acquire cancer treatment group Nuvalent for $10.6 billion, gaining access to three lung cancer drug candidates.

European stock markets sought direction on Tuesday, following an easing in Middle East tensions, while investors prepared for an upcoming European Central Bank interest rate decision later this week.

By 03:04 ET (07:04 GMT), the pan-European Stoxx 600 was mostly unchanged, Germany’s DAX had declined 0.1%, France’s CAC 40 held steady, and the U.K.’s FTSE 100 had moved down 0.4%.

Israel-Iran Pause Soothes Markets

Iran and Israel said they had halted a flare-up in attacks on each other, soothing some worries around the possibility that U.S. President Donald Trump will be able to reach a peace deal with Tehran.

Still, the Strait of Hormuz — a vital waterway for a fifth of the world’s oil and liquefied natural gas — remains all but shuttered to tanker traffic, while Trump has vowed to leave an American blockade of Iranian ports in place.

Brent crude futures, the global oil benchmark, edged down 1.0%, but remain well above pre-war levels. Eurozone government bond yields, which move inversely to bond prices, dropped.

ECB Hike on Thursday; Fed Move Also Priced In

Concerns have abounded that surging energy prices will spark a wave of inflation, persuading global central banks to raise interest rates in response.

The European Central Bank, in particular, is expected to roll out a rate hike on Thursday, as policymakers prioritize corralling price pressures over signs of sputtering growth in the 21-member Eurozone currency area.

In the United States, markets are also anticipating the Federal Reserve will lift rates before the end of the year — a bet spurred on by a robust May employment report last week.

GSK Slides on Nuvalent Deal

Away from the Iran war, shares of GlaxoSmithKline were lower by 2.1% after the drugmaker said it had agreed to buy cancer treatment group Nuvalent for $10.6 billion. The purchase is due to give GSK access to three lung cancer drug candidates.