European stock markets closed lower Tuesday as investors weighed political turmoil in the UK and fading hopes for a swift resolution to the US-Iran war.
The pan-European Stoxx Europe 600 index fell 1.01% to close at 606.63, with most major bourses and sectors ending the session in negative territory.
Germany’s DAX 40 posted the sharpest decline in Europe, dropping 1.62% to 23,954.93. Spain’s IBEX 35 fell 1.56% to 17,573.60, while Italy’s FTSE MIB lost 1.36% to 48,990.98.
France’s CAC 40 declined 0.95% to 7,979.92, while the UK’s FTSE 100 slipped 0.04% to 10,265.32.
Investor sentiment was hit by a deepening political crisis in Britain, where Prime Minister Keir Starmer faced growing calls from Labour Party lawmakers and government officials to resign or set a timetable for his departure after the ruling party’s poor performance in local elections last week.
Starmer told his Cabinet on Tuesday that he would not resign and would continue governing, noting that Labour’s formal process for a leadership challenge had not been triggered.
UK government bond yields rose amid the political uncertainty, with the benchmark 10-year gilt yield climbing to around 5.10%.
The British pound also came under pressure, losing 0.7% against the US dollar and 0.3% against the euro.
Markets were also weighed down by renewed concerns about the US-Iran war after US President Donald Trump said Monday that a ceasefire was “on life support,” following Tehran’s “unacceptable” counterproposal to Washington’s plan to end the conflict.
Oil prices rose after Trump’s remarks, adding to concerns that prolonged geopolitical tensions could keep inflationary pressures elevated and complicate the outlook for global growth.
On the corporate front, German pharmaceutical and chemicals group Bayer rose more than 4% after reporting a stronger-than-expected first-quarter adjusted operating profit of €4.5 billion ($5.3 billion), up 9% from a year earlier, and reaffirming its full-year guidance.
Bayer’s gains came as investors monitored the company’s long-running litigation risks related to Roundup, the herbicide brand it acquired through its $63 billion purchase of Monsanto in 2018.