The pan-European STOXX 600 was down 0.05% at 649.6

European shares were little changed on Tuesday ‌as escalating tensions in the Middle East and rising oil prices kept investors cautious, while Novartis suffered its steepest one-day decline on record after reporting a second setback in its drug pipeline.

The pan-European STOXX 600 was down 0.05% at 649.6. Switzerland’s ​benchmark index dropped 1.6%, weighed down by Novartis, which slipped 10.9%.

Novartis was the biggest faller on the STOXX ​600 after the Swiss drugmaker said its experimental treatment for a muscle-wasting disorder had failed ⁠in a late-stage trial. The news came a day after the company disclosed that an experimental cholesterol ​drug had also failed a closely watched late-stage study.

Energy shares rose 0.6% as Brent crude futures hovered around $98 a ​barrel. Oil prices rose after Yemen’s Houthi forces struck energy facilities and cities in Saudi Arabia, underscoring the risk that the conflict could spread further across the region and disrupt fuel supplies to international markets.

Mining stocks also rose as copper prices jumped. Boliden, Antofagasta and KGHM rose between 4.6% and 6.3%, while the broader European mining index climbed ​2%.

On the economic front, German exports unexpectedly dropped in July, with weaker shipments to European Union countries and China highlighting the fragility of ⁠the trade-driven recovery in the country’s economy.

Higher oil prices have revived inflation concerns, contributing to a recent global bond selloff and strengthening expectations that central banks may need to keep monetary policy restrictive for longer.

Investors widely expect the European Central Bank to raise interest rates by 25 basis points ​on Thursday. Although policymakers have ​signalled limited appetite for ⁠further tightening, markets are still pricing in another hike by year-end and one more in 2027.

Any hikes beyond September would move policy from the ‘insurance’ end of the ​spectrum into ‘restrictive’ territory. That shift still lacks sufficient support from the data, ING ​analysts said ⁠in a note.

They said: Markets may also be underestimating concerns about overtightening and the potential spillover into European bond markets.