By Avinash P
March 24 (Reuters) - European shares dipped to a near-four-month low on Tuesday, as conflicting signals from the ongoing war in the Middle East raised oil prices and dented risk appetite.
The pan-European STOXX 600 was down 0.3% at 575.24 points by 0930 GMT.
On Monday, the index had hit 559.05 points, its lowest level since November 2025, before closing at 576.78 points after U.S. President Donald Trump said there were "positive" talks to end the Iran war.
Later, Tehran rejected those comments
as “worn-out psychological operations” by the U.S. Oil rebounded to above $100 a barrel following Iran's statement. [O/R]
On Tuesday, European heavyweight financials and defence declined 1.4% and 1.8% respectively, weighing on the benchmark index, while energy stocks added 0.7%.
Oil price-sensitive travel and leisure sector, one of the hardest hit during the recent selloffs, declined 0.8%.
David Morrison, a senior market analyst at Trade Nation, said that markets hadn’t priced in a closure of the Strait of Hormuz.
"That's been a big ... unexpected switch, and that's what the markets are adjusting to now," Morrison said.
The Strait of Hormuz, which carries one-fifth of the global oil trade, has been largely shut since the war began, raising concerns of energy-driven inflation in Europe, which relies heavily on the route for its oil.
The impact of the war was seen in a survey that showed euro zone private sector growth slowed sharply in March. Similar surveys in Germany showed that the private sector grew at its weakest pace in three months, while France's contracted at its fastest pace since October.
Markets now expect at least two 25-basis-point rate hikes from the European Central Bank in 2026, which is a sharp contrast from expecting unchanged rates before the conflict.
Among individual stocks, Puig jumped 13.6% after Estee Lauder and the Spanish beauty group announced they were in talks regarding a potential merger.
On the flip side, Bellway dropped 8.2% after the homebuilder trimmed its operating margin outlook for fiscal 2026.
Bayer AG dipped 3.5% after a report stated that Inclusive Capital Partners is looking to sell a stake in the German agriculture and health firm.
Germany's DAX dropped 0.8%, dragged by SAP's 3.7% decline after J.P. Morgan downgraded the software maker to neutral from an overweight rating.
(Reporting by Avinash P in Bengaluru; Editing by Eileen Soreng and Harikrishnan Nair)
