European Stocks Muted Amid Iran-Oman Talks and Rising Inflation Concerns

European stocks were subdued on Wednesday as investors weighed the implications of talks between Iran and Oman regarding the Strait of Hormuz, as well as sticky US inflation data that slightly increased expectations for a Federal Reserve rate hike next month.

A senior Iranian source said Tehran and Oman are still working on the details of an agreement on the waterway, which handles one-fifth of global oil and gas shipments. However, the reopening of the waterway depends on the US meeting Iran's conditions, leaving investors cautious.

Despite this uncertainty, European banks led gains with a 1% rise, as Deutsche Bank advanced 4.3% to reach its highest since July 2011, while Commerzbank gained 2.8%. The pan-European STOXX 600 closed 0.01% lower at 656.41 points.

Investors are also awaiting Nvidia's second-quarter earnings for clues on whether the AI-driven spending boom can continue to justify lofty market expectations. Tech shares fell 0.8%, while healthcare shares led losses, falling 1%. SAP fell 2.9% and was the biggest drag on the benchmark after US software maker Intuit issued a disappointing forecast.