European Stocks Slip, Dollar Steady as Investors Assess Israel-Iran Truce and Await US Data
European stock markets edged lower on Wednesday, June 25, 2025, as investors evaluated the fragile ceasefire between Israel and Iran, brokered by U.S. President Donald Trump, while shifting focus to upcoming U.S. economic data. The pan-European STOXX 600 index fell 0.3% after an initial uptick, reflecting cautious sentiment despite a 1.4% surge the previous day fueled by truce optimism.
The ceasefire, announced on June 24, followed U.S. airstrikes on Iran’s nuclear facilities at Fordo, Natanz, and Isfahan, which Trump claimed had “obliterated” Iran’s nuclear program. However, a preliminary U.S. intelligence assessment suggests the strikes only delayed Iran’s nuclear capabilities by months, contradicting Trump’s assertion of a decades-long setback. This discrepancy has raised doubts about the truce’s stability, with investors wary of potential escalations, including Iran’s possible retaliation or closure of the Strait of Hormuz, a critical oil route.
Oil prices, which slumped after the ceasefire, rebounded slightly, with Brent crude rising 81 cents to $67.95 per barrel. The oil and gas sector gained 0.7%, bucking the broader market’s decline, as supply disruption fears lingered. European auto stocks rose 1.2%, and defense stocks climbed 0.9%, while media shares dropped 0.6%. Stellantis saw a 3.4% boost after Jefferies upgraded it to “buy.”
The U.S. dollar index remained steady at 97.91, close to a four-year low against the euro, which slipped 0.1% to $1.1599 but stayed near its highest level since October 2021. Investors shed the safe-haven currency as risk appetite grew, though analysts like Joseph Capurso from Commonwealth Bank of Australia warned that unresolved Middle East tensions could drive commodity prices and currency volatility. Two-year U.S. Treasury yields held at a 1.5-month low of 3.7868%, reflecting reduced inflation risks from lower oil prices.
Investor focus is now turning to U.S. economic indicators, including consumer confidence data and Federal Reserve Chair Jerome Powell’s Senate testimony on Wednesday. Recent U.S. data showing weaker-than-expected growth has bolstered expectations of Federal Reserve rate cuts, with an 18% chance priced in for July, according to the CME FedWatch tool. Powell noted that higher tariffs could raise inflation by summer, complicating rate decisions.
Global markets showed mixed responses. The S&P 500, as seen in the finance card above, sat less than 1% off its record high, buoyed by hopes of lasting peace, with SPY closing at $607.821. Asian markets were steady, with Japan’s Nikkei up 0.4% and Hong Kong’s Hang Seng climbing 1.3%. However, analysts caution that markets remain vulnerable to geopolitical shocks, with Deutsche Bank noting that only sustained economic impacts, like higher oil prices, significantly affect stocks long-term.
As NATO leaders meet in The Hague to discuss a proposed 5% GDP defense spending target, and with Trump’s envoy reporting “promising” U.S.-Iran talks, investors remain cautiously optimistic but vigilant. The interplay of geopolitical developments and U.S. monetary policy will likely shape market trends in the coming weeks.
