European Stocks Subdued as Middle East Tensions Counteract Bullish ASML Forecast

European equities were little changed in early trading Wednesday, as a rally in technology stocks, fueled by a positive forecast from semiconductor giant ASML, was counteracted by broader market caution amid escalating tensions in the Middle East.

The pan-European STOXX 600 index edged down 0.1% to 641.07 by 0709 GMT, with most sectors trading in negative territory, according to data from Reuters.

Tech Sector Gains on AI Optimism

The technology sector was a notable bright spot, rising 1.4% for the session. The gains were led by chip equipment manufacturer ASML, whose shares surged 6% after the company raised its financial forecasts for 2026. The bullish guidance helped reassure investors about the sustained strength of demand driven by the artificial intelligence boom.

The positive sentiment extended to other semiconductor-related firms, with shares of ASM and Soitec each rising more than 2%. The update from ASML comes after a period of investor jitters over whether the high valuations in the AI sector could be maintained following a strong second-quarter rally.

Geopolitical Headwinds and Sector Divergence

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Weighing on overall market sentiment were rising geopolitical risks, with oil prices climbing to $85 a barrel amid intensifying tensions between Iran and the U.S. that reportedly included the closure of the Strait of Hormuz.

Germany's benchmark DAX index underperformed its regional peers, falling nearly 1%. The decline was largely driven by a 2% drop in the shares of software company SAP. Other software firms, including Dassault Systemes and Capgemini, also lost over 1%, reflecting a potential investor rotation away from software companies seen as having less direct exposure to the AI hardware boom.

Corporate Earnings in Focus

In other company-specific news, luxury group Richemont saw its shares climb 5.3%. The owner of the Cartier brand reported better-than-expected first-quarter results, citing strong demand for its jewellery in Asia and the Americas. The report highlights how individual corporate performance remains a key driver for investors scrutinizing the current earnings season.