European stocks declined on Wednesday as escalating geopolitical tensions in the Middle East weighed on investor sentiment, while technology shares delivered mixed results as markets reassessed the sector's recent rally.

The pan-European STOXX 600 index fell 0.6% to 642.22 points in early trading.

Energy-sensitive sectors led the losses, with automobile stocks dropping 1.6% and the banking sector falling 1.3%.

Airline shares also came under pressure as oil prices climbed following renewed regional tensions. Air France and Wizz Air both lost more than 2%, while Lufthansa declined 4% after Citigroup downgraded the stock.

Market concerns intensified after renewed exchanges of fire between the United States and Iran, alongside Washington's decision to revoke a license that had allowed Tehran to sell oil, raising doubts over the durability of the fragile ceasefire.

Investors also continued to monitor technology stocks after a volatile start to July, following strong gains fueled by the global artificial intelligence boom in the previous quarter.

Among European chipmakers, ASML gained 1%, while semiconductor firms Soitec and Aixtron each fell by more than 1%.

In contrast to the broader market, Swedish broadband provider Bahnhof surged 18% after Telenor agreed to acquire a controlling stake in the company in a deal valuing it at approximately 6.1 billion Swedish kronor ($629.7 million).