European stocks open sharply lower as hopes for U.S.-Iran peace deal fade
A trader works on the floor of the American Stock Exchange AMEX) at the New York Stock Exchange (NYSE) in New York, US, on Wednesday, May 6, 2026.
Michael Nagle | Bloomberg | Getty Images
LONDON — European stocks are expected to open in negative territory as prospects for a speedy resolution to the U.S.-Iran war appear increasingly remote.
Shortly after the opening bell, the pan-European Stoxx 600 was 1.2% lower, with all sectors and major bourses firmly in negative territory.
Optimism over a looming U.S.-Iran peace agreement was dealt a reality check late on Monday when President Donald Trump said the ongoing ceasefire is “on life support” after Tehran sent an “unacceptable” counter to Washington’s proposal to end the war.
The state of the month-old truce is “unbelievably weak,” Trump told reporters in the Oval Office.
Oil prices rose in response to the comments and, overnight, bourses in the Asia-Pacific region traded in mixed territory. Meanwhile, U.S. stock futures hovered near the flatline on Monday night as traders looked ahead to the release of April’s consumer price index reading. Economists polled by Dow Jones expect inflation to have gained 3.7% from a year earlier.
A growing political crisis in the U.K. is also in focus for European markets on Tuesday as over 70 Labour Party lawmakers have now called on Prime Minister Keir Starmer to resign or set out a timetable for his resignation. It comes after the ruling party’s dire performance in local council elections last week.
The prime minister took responsibility for the poor election results and acknowledged on Monday that he had “doubters”. Starmer pledged to “face up to the big challenges” facing the country, but the speech failed to impress party insiders as several ministerial aides quit on Monday.
Yields on U.K. government bonds, known as gilts, extended gains on Tuesday morning. The yield on the benchmark 10-year gilt was last seen almost 10 basis points higher at 5.099%.
U.K. 10-year gilt
The British pound, meanwhile, was down 0.5% against the U.S. dollar, and lost 0.3% versus the euro. British banking stocks also sold off, with Natwest, down 4.6%, Lloyds, down 4.1%, and Barclays, down 4%, leading losses on the FTSE 100.
Corporate earnings also remain in focus, with Siemens Energy, Munich Re and Imperial Brands among the firms updating shareholders on their finances on Tuesday.
