European stocks drop amid Gulf developments

The pan-European Stoxx 600 slipped 0.8%, the Dax in Germany dropped 0.4%, the CAC 40 in France declined 0.5%, and the FTSE 100 in the U.K. dropped 0.7%

European stocks dropped on Monday after Iran’s negotiating team halted sending messages to the U.S. through mediators.

The pan-European Stoxx 600 slipped 0.8%, the Dax in Germany dropped 0.4%, the CAC 40 in France declined 0.5%, and the FTSE 100 in the U.K. dropped 0.7%.

Government bond yields in the Eurozone also jumped, reflecting bets that the European Central Bank could lift interest rates in order to respond to fears of an energy-induced inflation wave across the currency area. Yields tend to move inversely to bond prices.

Meanwhile, Brent crude futures, the international benchmark for oil, jumped. The Brent contract has remained below recent highs above $100 in recent days, yet has continued to float well above pre-war levels, fuelling ongoing worries over inflationary pressures.

Investors have been keeping a wary eye on diplomatic efforts to end the hostilities in the Middle East, which began with a U.S. attack on Iran in late February. In particular, traders are keen to see that a deal can be made which can reopen the Strait of Hormuz, a vital waterway near Iran’s southern coast which has been effectively shuttered to tanker traffic for much of the war, denting oil and natural gas flows worldwide.

Beyond the war, shares of easyJet soared more than 10% after the British budget carrier said it would consider any takeover proposal put forward by U.S.-based investment firm Castlelake. According to Reuters, easyJet flagged that it had not yet received any takeover interest from the group, although Castlelake said it was in the early stages of considering a proposal.

Elsewhere, Universal Music Group slipped after the firm rebuffed an unsolicited takeover offer from Bill Ackman’s Pershing Square Capital Management.