European shares traded modestly higher on Tuesday as investors assessed a wave of corporate earnings while continuing to monitor developments in the Middle East, where mixed signals from the United States and Iran kept uncertainty over the five-month-old conflict in focus, as per a Reuters report.
The pan-European STOXX 600 index rose 0.6% to 656.27 by 0710 GMT.
Energy stocks gained 0.1% as oil prices rebounded about 1% after a sharp decline in the previous session. According to Reuters, concerns remained that crude supplies from the Middle East could continue to face disruptions, with hopes for a diplomatic breakthrough between the United States and Iran still uncertain.
Market sentiment has fluctuated between optimism and caution since the conflict erupted in late February, as negotiations have repeatedly failed to produce a mutually acceptable resolution. Despite the geopolitical uncertainty, the STOXX 600 has advanced more than 5% since the conflict began, recovering from the lows recorded in March.
Travel and leisure stocks slipped 0.4%, reflecting investor concerns that higher fuel costs could weigh on airline and tourism companies if oil prices remain elevated.
Investors also focused on a busy corporate earnings calendar for fresh insights into the health of Europe's businesses and the broader economic outlook.
German airline Lufthansa was among the biggest decliners, with its shares falling 9% after the company issued a range for its 2026 adjusted operating profit. Reuters reported that the carrier's adjusted operating profit more than halved in the second quarter, largely due to increased fuel costs linked to the U.S.-Iran conflict.
Online fashion retailer Zalando dropped 13.2% after forecasting that its 2026 revenue and growth would come in at the lower end of its previously guided range. The company also narrowed its adjusted operating profit outlook, disappointing investors.
Meanwhile, German pharmaceutical and life sciences group Bayer outperformed the broader market, with its shares rising 3.7% after reporting a surprise 1.9% increase in quarterly operating profit, offering a positive signal amid an otherwise mixed earnings season.
Investors are expected to remain focused on upcoming earnings reports and geopolitical developments, with both corporate performance and the trajectory of the U.S.-Iran conflict likely to influence market direction in the coming sessions.
