European stocks end lower as Germany slashes growth outlook over Iran war shock

European stocks closed lower on Wednesday as investors weighed Germany’s sharply downgraded growth outlook, persistent disruption in the Strait of Hormuz, and continued uncertainty over the US-Iran ceasefire.

The pan-European STOXX 600 index fell 0.35%, or by 2.15 points, to 613.88.

Germany’s DAX also lost 0.31% to end the midweek at 24,194.9, while the UK's FTSE 100 declined 0.21% to 10,476.46.

France’s CAC 40 dropped 0.96% to 8,156.43, Italy's FTSE MIB slipped 0.25% to 47,785.46, and Spain's IBEX 35 fell 0.75% to 18,006.4.

The euro/dollar parity was also down 0.23% to 1.1717 as of 1730GMT.

Meanwhile, Germany halved its economic growth forecast for 2026 to 0.5% from 1%, and trimmed its 2027 projection to 0.9% from 1.3%, saying the conflict in the Middle East and the de facto closure of the Strait of Hormuz pushed up costs for households and businesses.

Berlin also raised its inflation outlook, projecting consumer prices to rise 2.7% this year and 2.8% next year, as higher energy and raw material costs feed through to the broader economy.

Market sentiment also remained fragile after US President Donald Trump said Washington would extend its ceasefire with Iran on Tuesday until Tehran presents a “unified proposal,” while keeping the naval blockade in place.

Investors continued to assess whether the truce could hold and whether any diplomatic breakthrough would be enough to ease pressure on energy supplies and shipping flows through the key waterway. Rising oil prices helped push eurozone bond yields higher and kept broader risk appetite in check across European equities.

Separately, the UK's annual inflation rate increased to 3.3% in March, up from 3% in February, due to higher energy prices.