April 22 (Reuters) - European shares dipped on Wednesday, extending losses for a third straight session, as a fragile U.S.-Iran truce weighed on sentiment, while investors also assessed a raft of regional corporate earnings.
Iran seized two ships in the Strait of Hormuz, tightening its grip on the strategic waterway, while U.S. President Donald Trump continued the U.S. Navy's blockade of the Iranian coast.
The pan-European STOXX 600 index ended 0.4% lower at 613.88 points. Major regional bourses were also lower, with Germany's DAX shedding 0.3% and France's CAC 40 down 1%. Germany's economy ministry halved its 2026 growth forecast, while raising its inflation projections.
Geopolitical uncertainty in the Middle East continued to weigh on markets, with euro zone bond yields edging up as oil hit $100, as Trump's indefinite ceasefire announcement appeared unilateral, with neither Iran nor Israel signalling whether they would honour the agreement.
"We know that the rising energy prices are weighing on demand and on economic growth projections. So unless we do see concrete progress in peace negotiations, I believe that the moves up and down do not necessarily reflect a high conviction direction," said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
The energy sector jumped 2.3%, continuing to benefit from higher oil prices. Materials and technology inched up 1.7% and 0.6%, respectively.
ASM International shares jumped 7.1% with the computer chip equipment maker forecasting second-quarter revenue guidance above market expectations.
Other chip and technology equipment makers also rallied with German chipmakers and suppliers Aixtron and Infineon rising over 3% each, while ASML and BESI gained 1% and 1.9%, respectively.
"It will be interesting to see if tech can withhold the pressure in earnings season and whether investors start to question once again whether companies are over-investing in AI," said Daniela Hathorn, senior market analyst at Capital.com.
"For now, it's still a key driver in markets."
Travel and leisure stocks declined 2.1% as high energy costs and geopolitical uncertainty weighed. Aerospace and defence shares lost 2.4%.
Telecommunications dropped 1.9%. Deutsche Telekom slipped 4.8% after reports that the company is considering a full combination with T-Mobile US that could result in the largest public M&A deal on record.
Global markets have recouped most losses in April following the sharp selloff after the U.S. and Israel war on Iran, but the European benchmark is yet to return to pre-war levels.
ABB rose 3.4%, hitting a record high earlier after the Swiss engineering group raised its full-year sales outlook.
Dettol soap maker Reckitt declined 4.6% after missing quarterly like-for-like net revenue expectations for its core business and warning of lower first-half margins.
On the macroeconomic front, euro zone consumer morale decreased in April, data showed on Wednesday.
(Reporting by Ragini Mathur, Twsha Dikshit, and Utkarsh Hathi in Bengaluru; Editing by Sherry Jacob-Phillips, Nivedita Bhattacharjee and Keith Weir)
By Ragini Mathur and Utkarsh Hathi
