European markets slightly higher; defense stocks rally on Middle East tensions

LONDON — European stocks were slightly higher Wednesday as investors attempted to look beyond escalating tensions in the Middle East and awaited fresh employment data out of the region.

The pan-European Stoxx 600 was up 0.17% by 10:00 a.m. London time, with the majority of sectors and major bourses moving in the green. Oil and gas stocks added 2.42% on the prospect of supply disruptions in the Middle East, while travel and leisure stocks dipped 0.25% as airlines diverted flights out of the region.

On the stock front, defense companies ticked higher on the rising conflict risks, with Saab and BAE Systems adding 2.2%, while Thales and Rheinmetall both rose more than 1.3%.

Meantime, shares of British sports retailer JD Sports fell 3.5% even as the company reported expectation-beating revenues and profits for the first half. It comes as revenues at Nike, whose products it sells, fell short on Tuesday.

The cautious uptick follows a negative start to the trading month on Wall Street, with the Nasdaq Composite shedding 1.5% and the S&P 500 losing 0.9%, after Iran launched a ballistic missile attack on Israel in retaliation for its recent killing of Hezbollah leader Hassan Nasrallah and an Iranian commander in Lebanon.

The attack came on the heels of Israel‘s deployment of ground forces into south Lebanon, escalating its offensive on Hezbollah, the Iran-backed militant group.

Oil prices spiked following the attack, while the CBOE Volatility Index (VIX), also known as Wall Street’s fear gauge, topped 20 at its high of the day.

U.S. futures remained lower in overnight trading, while Asia-Pacific markets were mixed.

Mainland China markets were closed Wednesday for the Golden Week holiday and will remain closed for the rest of the week. However, Hong Kong’s Hang Seng index traded more than 6% higher, signaling more optimism about Beijing’s stimulus policies.

Back in Europe, investors are awaiting fresh unemployment data from the region as well as U.K. house price data.

— CNBC’s Dan Mangan contributed to this report.