Europe stocks edge lower as Iran-US talks stall, ECB forum looms

European shares lost a little ground as the second half of the year began, with the STOXX 600 down 0.1% to 640.79 points at 0825 GMT after a powerful quarter left investors more sensitive to any sign of trouble in Iran-U.S. diplomacy. The pullback was modest, but it came after Europe’s benchmark posted its strongest quarter since October 2020 and the biggest quarterly rise for European shares in more than five years.

That rally had been built on optimism around artificial intelligence and a softer Middle East risk backdrop, and both themes were visible in Tuesday’s trading. The STOXX tech index had just delivered its strongest quarterly performance since late 2001, underscoring how much of the market’s advance has rested on a narrow set of growth names. On Wednesday, ASML was steady and Soitec rose 5.2%, while Schneider Electric fell 2.2% after it agreed on June 30 to buy Cognite Holding B.V. for $3.1 billion in cash. Schneider said the company would be folded into its industrial software operations.

Geopolitics remains the clearest near-term threat to that calm. Peace talks between Iran and the United States have stalled again, and traders are watching whether that diplomatic deadlock starts to show up in crude and inflation pricing. Oil prices had already fallen more than 3% on June 22 after U.S. officials said progress had been made in talks with Iran and that the Strait of Hormuz was open, a reminder of how quickly the energy risk premium can shrink or reappear. A fresh flare-up would put pressure on energy-sensitive sectors, lift inflation expectations and complicate the case for rate cuts across global portfolios.

Central-bank messaging is adding a second layer of uncertainty. The European Central Bank’s Sintra forum, held annually in Sintra, Portugal, opened with a July 1 session featuring Kevin Warsh and Christine Lagarde, drawing the attention of investors trying to gauge how forceful policy makers will remain. Markets are pricing at least one 25-basis-point hike from both the ECB and the Federal Reserve later in 2026, leaving rate-sensitive equities exposed if the tone in Sintra turns more hawkish than expected.

Stock-specific moves also showed how uneven the market backdrop has become. Associated British Foods said it expects adjusted operating profit and adjusted earnings per share for 2026 to come in below last year’s levels. Saab gained after announcing a Gripen E fighter-jet deal with Ukraine worth about 24.6 billion Swedish crowns, with deliveries scheduled for 2029 to 2030. Adidas and Puma each fell more than 1% after Nike offered a cautious outlook tied to weakness in China, reinforcing how trade, growth and currency risks are still leaking into European equity performance.