European equities lost ground on Thursday, with the STOXX 600 down 0.4% as an impasse between Washington and Tehran, concerns about near-term artificial intelligence deployment, and higher sovereign bond yields undermined investor confidence. Germany’s DAX fell 0.6%, France’s CAC 40 declined 0.4% and London’s FTSE 100 slipped 0.3%. Hopes for an immediate diplomatic breakthrough at the United Nations General Assembly faded as U.S. and Iranian officials remained divided over a formal peace agreement and reopening the Strait of Hormuz, lifting energy risk premiums. Technology stocks also weakened after global industry leaders raised concerns about AI deployment risks, monetisation schedules and regulatory hurdles ahead of senior technology panels in Washington. Investors maintained elevated cash holdings as Chinese President Xi Jinping and U.S. President Donald Trump prepared for high-stakes talks in Washington, with markets watching for progress on trade relations and technology export protocols. French assets faced additional pressure ahead of business-climate and consumer-confidence data, while the cost of insuring French government debt against default through credit default swaps (contracts protecting against default) reached multi-year highs. French OATs, or government bonds, remained among the euro area’s weakest performers as parliamentary gridlock clouded the outlook for structural budget consolidation. U.S. Treasury yields also reached multi-year highs overnight as traders priced a greater chance of synchronized central-bank tightening. The CME FedWatch tool showed markets assigning a 70% probability to another Federal Reserve interest-rate increase next month, up from 50%. Higher global risk-free rates are putting pressure on equity valuations and could end the STOXX 600’s multi-month winning streak as borrowing costs, volatile gas prices and hawkish central-bank guidance test investor conviction.