European stocks retreated at the open on Wednesday amid escalating tensions in the Middle East, as investors warned that the rising regional unrest was weighing on gains made by technology shares, which had been buoyed by strong guidance from chip equipment maker ASML.

By 07:09 GMT, the pan-European STOXX 600 index had slipped 0.1% to 641.07 points, with losses recorded across most sectors.

Technology stocks rose 1.4%, driven by gains in ASML shares, which jumped 6% after the company raised its financial outlook for 2026, boosting investor confidence in the strength of artificial intelligence-related demand.

Shares in other chip-related companies, including ASM and Soitec, each gained more than 2%, while Germany's benchmark index underperformed the rest of the region, falling around 1% under pressure from a 2% decline in software firm SAP. Shares in other software companies, including Dassault Systèmes and Capgemini, also fell more than 1% each.

Among other movers, Swiss luxury goods group Richemont — owner of the Cartier brand — rose 5.3% after reporting better-than-expected first-quarter results, supported by robust demand for its jewellery in Asia and the Americas.

Investors are weighing quarterly results and corporate guidance at a time when oil prices have climbed to $85 per barrel following an escalation in tensions between Iran and the United States, with Tehran moving to close the vital Strait of Hormuz.

Japanese indices closed higher on Wednesday, supported by strong financial results from major US banks. The Nikkei rose as chip-related stocks advanced in the wake of Wall Street gains and positive guidance from chip equipment manufacturer ASML.

The Nikkei closed up 1.49% at 68,751.51 points, while the broader Topix index gained 1.22% to reach 4,088.12 points.

The S&P 500 and Nasdaq both advanced on Tuesday, as strong results from major banks and lower-than-expected inflation data boosted risk appetite even as Middle East tensions continued to mount.

The US semiconductor index, a key benchmark for Japanese semiconductor-linked stocks, rose 2.54%. ASML raised its 2026 financial guidance during Asian trading hours, announcing plans to expand its production capacity after posting second-quarter profits that exceeded expectations, driven by demand for artificial intelligence.

Fumio Matsumoto, chief analyst at Okasan Securities, said: