By Ankika Biswas, Joao Manuel Vicente Mauricio and Pranav Kashyap
(Reuters) -Europe's main stock index touched its lowest level in three months on Tuesday, as escalating geopolitical tensions, fuelled by Russia lowering its threshold for a nuclear strike, spurred investors to head to safer havens.
The pan-European STOXX 600 closed 0.4% lower, after falling 1% to its lowest point since Aug. 8 earlier in the session. It logged a third straight day of losses.
Poland, which borders Ukraine, saw its blue-chip index, WIG20 slide more than 3%, falling the most among regional indexes in Europe.
Safe-haven assets such as gold and the U.S. dollar were on the rise. [FRX/][GOL/]
The Kremlin said the aim of the updated nuclear doctrine was to make potential enemies understand the inevitability of Russian retaliation for an attack.
"Every nation wants to avoid a nuclear war, but the fact that we've seen Putin makes steps towards that possibility has led to a risk-off or a safe haven move," said, Daniela Hathorn, senior market analyst at Capital.com
"It's clear people are looking for avenues to safely park their money, at least for now, but we're not there yet in terms of panic or a significant sell off."
The Euro STOXX volatility index closed at 19.23, having reached 21.40 earlier in the day - near the highest levels seen this month, signalling growing investor anxiety.
Consumer discretionary-linked stocks, often tied to disposable income, took a nosedive.
Automobiles and luxury stocks were the top sector decliners. Both fell over 1.1% each.
Banks, including names such as UniCredit and Raiffeisen that are Russia-sensitive, slumped 1.4% to make it the worst-hit sector in an overall market decline.
The upcoming appointments of a U.S. Treasury secretary and trade representative under President-elect Donald Trump are also in focus after last week's picks for the health and defence roles.
Investors are starting to question the impact of potentially inflationary policies from Trump, such as possible tax cuts, while also awaiting AI chip leader Nvidia (NASDAQ:NVDA)'s earnings on Wednesday, said Richard Hunter, head of markets, Interactive Investor.
With ECB policymakers expressing concern over potential U.S. trade tariffs hurting euro zone growth, any signals on the global interest rate-cut trajectory will be closely watched.
Trump's policies could complicate the prospects for further U.S. rate cuts.
Among single stocks, Rheinmetall (ETR:RHMG) gained 3.8% after the defence group said it aims for 20 billion euros ($21.08 billion) in sales for 2027.
Diploma Plc fell 8% after the technical products and services provider missed full-year revenue estimates.
Caixabank lost 5.3% after the bank presented its new 2025-2027 strategic plan.
Nestle (NS:NEST) dropped 1.9%. The food giant is set to boost advertising and marketing, trim costs by $2.8 billion by 2027 and carve out its water and premium drinks businesses into a standalone global unit.
Shares of Aeroports de Paris rose 3.4% after Stifel upgraded the French airport operator's stock to "buy" from "hold".