European stock markets traded lower on Thursday as investors remained cautious, awaiting further developments in peace negotiations between the United States and Iran.

Iran stated it was reviewing Washington's latest response to end the conflict, while U.S. President Donald Trump indicated a willingness to wait to 'get the right answers' from Tehran, though warning that hostilities would resume should an agreement fail to materialize.

The pan-European STOXX 600 index was down 0.2% at 618.79 points by 0701 GMT, following a 1.5% gain on Wednesday that saw it close near a two-week high.

European bourses have struggled to recover to pre-war levels, hampered by the region's reliance on oil imports and limited exposure to artificial intelligence technology, even as global markets have rebounded.

Sources told Reuters that a European Central Bank rate hike in June was virtually a done deal, though the central bank is expected to remain non-committal regarding subsequent moves.

Money markets are currently pricing in more than two ECB rate hikes before the end of the year.

EasyJet fell 1.8% after the British low-cost carrier reported first-half losses and stated that its full-year outlook remains uncertain in light of the war in Iran.

(Reporting by Twesha Dikshit; editing by Harikrishnan Nair; Spanish translation by María Bayarri Cárdenas)