European shares edged lower on Monday as renewed fighting between the United States and Iran unsettled investors after Tehran closed the Strait of Hormuz, sending oil prices sharply higher and reviving concerns over global inflation and energy supplies.
The pan European STOXX 600 index fell 0.3% to 639.29 points by 0702 GMT, extending losses after recording its steepest weekly decline since late April on Friday.
The renewed escalation has cast doubt on the durability of the US Iran agreement reached last month, which had sought to restore safe shipping through the Strait of Hormuz and create momentum for broader diplomatic negotiations.
Energy stocks gain as oil surges
Oil prices climbed more than 4% as fears of supply disruptions through the strategic waterway boosted crude markets.
Stay ahead of the geopolitical week.
MD Briefing delivers expert analysis across five global fronts — the Indo-Pacific, energy, geoeconomics, European security, and the Middle East — every Monday morning. Free.
The rally lifted Europe’s energy sector, with the STOXX 600 energy index rising 1.6%, making it one of the strongest performing sectors in early trading as investors rotated into oil and gas companies expected to benefit from higher crude prices.
Technology stocks remain under pressure
Technology shares continued to weigh on the broader market, with the sector falling 1.2%.
Investor sentiment toward chipmakers remained cautious following the Nasdaq debut of South Korea’s AI memory giant SK Hynix on Friday. Although the company’s US listed shares surged 12.8% on their first trading day, concerns over elevated valuations across the artificial intelligence sector continued to trigger profit taking.
Markets are also looking ahead to the upcoming corporate earnings season for confirmation that company profits can justify recent gains in technology stocks.
AkzoNobel rises on takeover offer
Among individual companies, shares in Dutch paints manufacturer AkzoNobel gained about 3% after Japan’s Nippon Paint offered to acquire the company’s decorative paints business for 7.5 billion euros, equivalent to about $8.55 billion.
The proposed transaction was one of the few bright spots in an otherwise cautious European trading session.
Why it matters
European markets remain highly sensitive to developments in the Middle East because of the region’s importance to global energy supplies. Any prolonged disruption to shipping through the Strait of Hormuz could push oil prices higher, complicating inflation trends and influencing the outlook for interest rates across Europe.
Future outlook
Investor attention will remain focused on developments in the Gulf, particularly whether shipping through the Strait of Hormuz resumes safely or faces further disruption. At the same time, the start of the corporate earnings season will test whether strong company results can offset geopolitical uncertainty and renewed concerns over stretched technology valuations.
With information from Reuters.
