European equity markets are subdued as expectations for a swift resolution to the Middle East conflict faded following fresh US strikes against Iran.

** The paneuropean Stoxx 600 index is steady at 631.56 points as of 09:40 CET.

** Yesterday, the index closed at its highest level since February 27 - prior to the start of the conflict - coming within 1% of its all-time high on hopes that regional peace might be imminent.

** However, the latest strikes and statements from US Secretary of State Marco Rubio, suggesting that deal negotiations with Iran could 'take a few days', have dampened optimism, leading markets to scan for signs of further escalating tensions.

** Brent crude prices rose nearly 3%, fueling inflationary fears given the eurozone's heavy reliance on crude imports through the Strait of Hormuz.

** Energy-sensitive airlines, such as LUFTHANSA and RYANAIR, are down 1.2% and 1.3% respectively.

** Morgan Stanley also downgraded the German carrier.

** Among other movers, FERRARI fell 5.9% after unveiling its first fully electric car, at a time when rivals including PORSCHE and Lamborghini are scaling back their ambitions in the sector due to weak demand.

** The stock is on track for its largest daily loss since October and is weighing on the automobiles and parts sector, which is down 1.6%. Most other sectors are showing mixed performance.

(Translated by Greta Colombo, editing by Stefano Bernabei)