London: European stocks closed lower on Wednesday as investors weighed Germany's sharply downgraded growth outlook, persistent disruption in the Strait of Hormuz, and continued uncertainty over the US-Iran ceasefire. The pan-European STOXX 600 index fell 0.35%, or by 2.15 points, to 613.88.

According to Anadolu Agency, Germany halved its economic growth forecast for 2026 to 0.5% from 1%, and adjusted its 2027 projection to 0.9% from 1.3%. The conflict in the Middle East and the de facto closure of the Strait of Hormuz have increased costs for households and businesses, driving these changes. Germany also raised its inflation outlook, anticipating consumer prices to rise 2.7% this year and 2.8% next year, as higher energy and raw material costs impact the broader economy.

Market sentiment remained fragile following US President Donald Trump's announcement that Washington would extend its ceasefire with Iran until Tehran presents a 'unified proposal,' while maintaining the naval blockade. Investors are assessing whether the truce could hold and whether any diplomatic breakthrough might ease pressure on energy supplies and shipping flows through the vital waterway. Rising oil prices contributed to higher eurozone bond yields, affecting broader risk appetite across European equities.

Germany's DAX lost 0.31% to end midweek at 24,194.9, while the UK's FTSE 100 declined 0.21% to 10,476.46. France's CAC 40 dropped 0.96% to 8,156.43, Italy's FTSE MIB slipped 0.25% to 47,785.46, and Spain's IBEX 35 fell 0.75% to 18,006.4. The euro/dollar parity also decreased by 0.23% to 1.1717 as of 1730GMT.

In related economic developments, the UK's annual inflation rate increased to 3.3% in March, up from 3% in February, driven by higher energy prices.