European shares were muted on Wednesday following the previous day's rally, as investors evaluated a range of corporate earnings reports while monitoring the evolving situation in the Middle East.
The pan-European STOXX index edged up 0.05% to 620.24 points as of 0715 GMT.
Major regional markets were subdued, with Germany's DAX, and London FTSE 100 adding 0.1% and 0.2%, respectively.
Diplomatic efforts offered a glimmer of hope for resolving the war in the Middle East as U.S. President Donald Trump said that talks with Iran could resume in Pakistan within the next two days.
The fresh effort comes after negotiations collapsed last weekend, prompting Washington to impose a blockade on Iranian ports. Officials from both Pakistan and Iran have confirmed the potential restart of negotiations.
The prospect of a diplomatic resolution has helped the STOXX 600 recover most of the losses it had sustained since hostilities erupted in late February, reflecting investors' optimism about potential de-escalation in the region.
Meanwhile, corporate earnings also remained a key focus for investors.
Hermes plunged 13.4% after the French luxury group reported a hit to first-quarter sales linked to the Iran war.
Sales at Kering's Italian flagship brand Gucci dropped by 8% in the first quarter from the previous year. Shares of the luxury fashion group fell 8.8%.
The personal and household goods index, which includes luxury sector companies, led the losses with a 2.2% drop.
On the other hand, healthcare stocks were leading gainers, up 0.8%. Novo Nordisk and AstraZeneca advanced 3% and 1.2%, respectively.
ASML shares were muted after the Dutch semiconductor equipment leader raised its 2026 revenue outlook as demand for artificial intelligence chipmaking tools rises.
(Reporting by Ragini Mathur; Editing by Ronojoy Mazumdar)
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