Europe midday: Shares fall as Iran-US missile exchange hits sentiment

(Sharecast News) - European shares fell into the red by midday on Wednesday after the US and Iran exchanged missile fire overnight, while investors looked ahead to American inflation data later in the day.

The pan-regional Stoxx 600 index was down 0.34% to 616 at 1157 BST. Germany's DAX fell 0.71% and the UK's FTSE 100 declined by 0.41%.

US military officials said strikes had hit Iranian air defence, ground control stations, and surveillance radar sites near the Strait of Hormuz. Iran had responded by launching missiles at Jordan, Bahrain and Kuwait although no damage was reported.

The US strikes were ordered by President Donald Trump who claimed Iran shot down an American helicopter that was patrolling the strait. Tehran has not claimed responsibility for the incident.

Oil prices were largely unchanged, with Brent crude at $91 a barrel and West Texas Intermediate down 0.36% to $87.88.

"Markets are directionless as we move through Wednesday. A flare up in tensions between Iran and the US has not translated into an oil price spike. There is a lack of anxiety in the oil market right now, even though a peace deal is unlikely in the current scenario," said XTB research director Kathleen Brooks.

"The oil market is trading on hope that a resolution can be found, and on a loosening of oil supply. Although Iran continues to block most tankers from passing through the Strait of Hormuz, there is a significant amount of Middle Eastern oil leaving the Persian Gulf by tanker through the Strait and through other routes."

"The decline in onshore Middle Eastern oil inventories is also telling us that Middle Eastern oil supply is managing to loosen up, even if it is nowhere near pre-war levels. For example, UAE oil company ADNOC is selling 14mn barrels of oil this week and is planning a second tender in the coming days."

US May inflation data is forecast to show a rise in core and headline inflation, with the consensus for headline CPI to hit 4.2% - its highest in three years. This would place the Federal Reserve under pressure to hike interest rates.

In equity news, Pennon Group fell after results, while Norwegian tech and defence giant Kongsberg was also down after announcing revenue targets for 2029 and 2033.

Reporting by Frank Prenesti for Sharecast.com