European stock markets closed in negative territory on Wednesday, driven by risk aversion stemming from concerns over a potential prolonged maritime blockade of Iranian ports and a divided corporate earnings season.

The Stoxx Europe 600 index declined by 0.6%. A renewed rise in oil prices and the prospect of extended disruptions in the Strait of Hormuz fueled worries about inflation and economic growth, with retail and utilities sectors leading the losses.

On the earnings front, Deutsche Bank shares fell 1.8% after the lender reported an increase in provisions for non-performing loans and a key capital metric falling short of expectations. In contrast, UBS Group gained 3.2%, as its trading business helped drive an increase in first-quarter profit, putting the Swiss wealth manager on track to enhance returns for investors this year.

The European earnings season has begun on a mixed note, with investors closely monitoring how energy price increases—fueled by conflict in Iran—may translate into broader inflationary pressures. The possibility of an extended blockade of the Strait of Hormuz has heightened market tension ahead of key central bank meetings this week. The U.S. Federal Reserve is expected to hold interest rates steady later today, while the Bank of England and the European Central Bank will announce their rate decisions on Thursday.

Any complacency regarding interest rates poses a significant market risk. Inflation expectations among eurozone consumers have risen noticeably, increasing the risks facing equity markets, while current valuations do not appear to fully reflect this threat.

"Europe is more vulnerable to rising oil prices, particularly in natural gas and refined products, whereas the U.S. benefits from greater domestic supply," said Roger Lee, Head of Equity Strategy at Cavendish. "The inflationary impact could be greater, raising the risk of a more forceful central bank response."

In other individual stock movements, Adidas posted its largest gain in over a year after reporting strong first-quarter results, supported by robust demand for football, running, and training products.