(Bloomberg) -- European stocks fell on Wednesday, weighed down by disappointing results from ASML Holding NV and Swiss industrial conglomerate ABB Ltd., and as traders assessed escalating tensions in the Middle East.

The Stoxx Europe 600 was down 1.1% at the close, its lowest level in over a week. Chip equipment firm ASML dropped after its order intake plunged in the third quarter, while ABB declined the most in over three years after posting worse-than-expected earnings. AstraZeneca Plc was the biggest drag on the index after its new cancer medicine developed with Daiichi Sankyo Co. appeared to fall short of investors’ expectations in partial results released early after a medical conference data leak.

Energy stocks and consumer products outperformed as Adidas AG jumped after it boosted its guidance for a second time in three months. In the UK, the domestically-focused FTSE 250 index slipped as data showed inflation failed to slow as forecast in September, leaving open the possibility of a further interest rate hike from the Bank of England.

“The picture from the data is unfortunately a simple one — as food and goods prices begin to fall, energy prices are rising again,” said George Lagarias, chief economist at Mazars. “The swiftly rising tensions in the Middle East are exacerbating the situation. A quick end to oil price speculation could, all other things being equal, stop the third inflation wave at the onset and allow prices to normalize,” he wrote in emailed comments.

Europe’s stock benchmark has been treading water this month, with sentiment souring following Hamas’s attack on Israel. A planned summit between President Joe Biden, who arrived in Israel Wednesday, and Arab leaders was canceled following a deadly blast at a hospital in Gaza. Market positioning has turned more cautious and investors have rotated into defensive sectors and value stocks.

Read More: Wall Street Hedging Appetite Muted Even as Mideast Crisis Grows

“Uncertainty will last for several weeks at least, and risk premia (on energy prices and on corporate valuations) could even creep higher for a while,” said Roberto Scholtes, head of strategy at Singular Bank. “Investors should definitely get ready for it, seeking diversification and hedges in assets such as short-term government bonds, gold, oil and the energy sector, while the dollar should remain strong for the time being.”

Goldman Sachs Group Inc. strategist Cecilia Mariotti also said a prolonged period of geopolitical risk, coupled with sticky inflation, could revive worries about economic growth, making any year-end rally in stocks “smaller and short-lived.”

For more on equity markets:

  • Some Market Indicators Are Remarkably Risk-On: Taking Stock
  • M&A Watch Europe: Nexi, Intervest, Continental, Pendragon
  • CVC Capital Eyes IPO in Rough Market for Buyout Firms: ECM Watch
  • US Stock Futures Fall; Ultragenyx, United Airlines, Terex Fall
  • Apax to Buy Tech Consulting Firm Kin and Carta: The London Rush

You want more news on this market? Click here for a curated First Word channel of actionable news from Bloomberg and select sources. It can be customized to your preferences by clicking into Actions on the toolbar or hitting the HELP key for assistance. To subscribe to a daily list of European analyst rating changes, click here.

--With assistance from Michael Msika and Kit Rees.

©2023 Bloomberg L.P.