European stocks slip as lack of progress on US-Iran peace lifts oil

European shares closed lower on Wednesday as oil prices rebounded to over $100 a barrel, pushing up government bond yields again as the Iran conflict showed no signs of an end.

The benchmark pan-European STOXX 600 ended 0.4% lower, reversing its gains from earlier in the session.

Most major regional bourses also lost ground.

Brent crude futures LCOc1 rose over 1%, topping the crucial $100 a barrel.

They held at their lowest levels in two weeks, hit after five sessions of declines.

Markets parsed through duelling speeches from Iran and the US at the UN General Assembly.

Iranian President Masoud Pezeshkian said that Tehran would never surrender to the US, a day after US President Donald Trump used the same forum to threaten to “annihilate” Iran.

The yield on Germany’s 10-year bond, the benchmark for the euro zone, was last at 3.550%, while the US 10-year Treasury yield rose to 5.085%, its highest since 2007.

“There was clearly some hope that there would be some dialogue that could hasten the end of the conflict, but it doesn’t seem that there was much progress,” said Steve Sosnick, chief market analyst at Interactive Brokers.

“We’ve come a long way in a short period of time, so we were set up for a little bit of profit taking today.” Most major sectors on the STOXX 600 were lower, except for energy shares that rose 1.3%.

Heavyweight bank stocks lost 0.4%, while insurance and construction and materials were the biggest percentage decliners, down 1.7% and 1.3% respectively.

The moves come after global markets rallied sharply earlier this week.

The STOXX 600 is still 0.8% higher this week, after marking declines for the last three weeks, as oil prices and bond yields rallied, and the European Central Bank delivered its second interest rate hike this year.

Separately, an S&P Global PMI survey showed business activity across the euro zone accelerated this month at its fastest pace in more than three years, defying expectations for a slowdown.