PARIS: European shares lost ground on Thursday as a raft of downbeat corporate earnings, including from packaged food giant Nestle, worsened the risk-averse mood, driven by jitters around the Middle East war and uncertainty over interest rates.

The pan-European STOXX 600 fell 1.2% hitting a two-week low, in a broad-based selloff.

European stocks have seen steep declines this week, sliding for the third straight session, hit by Middle East tensions and interest rate worries following robust US economic data and mixed earnings reports.

Geopolitical tensions continued to mount as Israel pounded Gaza with more air strikes on Thursday. British Prime Minister Rishi Sunak followed US President Joe Biden on visits to demonstrate Western support for the war against Hamas.

Further pressuring equities, US Treasury yields jumped to multi-year highs, awaiting commentary by Federal Reserve Chair Jerome Powell, with the bond sell-off pushing Italian bond yields to an 11-year high.

“A mix of inflation worries plus US resilience is clearly the main driver why markets have repriced again the odds of another rate hike by the Fed later this year,” said Thomas Hempell, Head of Macro & Market Research at Generali Investments.

“(There’s) uncertainties about the behaviour of the Fed, and clearly that overlaps with the Middle East tensions.” Rate-sensitive real estate firms led sectoral declines, dragged by a 14.3% fall in Britain’s Rightmove Plc after US real estate firm CoStar agreed to buy the property portal’s rival OnTheMarket.