European stocks edged higher Wednesday as investors weighed the ongoing Middle East conflict alongside corporate earnings reports. German shares gained 0.6%, French equities rose 0.5%, and the UK market climbed 0.1%, reflecting cautious optimism despite geopolitical risks. The conflict intensified overnight, with U.S. Admiral Brad Cooper stating Iran's air defenses were degraded, its navy largely incapacitated, and over 2,000 targets hit.

Israel targeted Hezbollah in Lebanon, escalating regional tensions. Energy prices surged, particularly European gas, acting as a brake on bond yields, analysts noted, warning high energy costs could burden consumers globally. some see a potential long-term equity benefit if the conflict ends the 2023 war. Bayer disappointed investors with 2026 earnings guidance below expectations, citing costly litigation and massive debt burdens. The German drugmaker also flagged challenges in its core tyres business due to volatile demand.

Elsewhere, sportswear giant Adidas projected a €2.3 billion operating profit increase, while French reinsurer Axa delivered strong underwriting results. Eurozone unemployment data is due soon, though ECB policymakers are unlikely to change rates immediately despite inflation rising unexpectedly to 1.9%. Crude oil prices surged 2.9% to $83.78 a barrel, driven by Middle East supply fears, with Iraq cutting output significantly.