European stocks drop as oil rises

The benchmark pan-European STOXX 600 index dropped 0.2%,

European stock markets slipped on Monday as an intense flare-up in Middle East hostilities sent investors fleeing from risk assets, compounded by Iran’s declaration that the vital Strait of Hormuz shipping lane has been closed.

The benchmark pan-European STOXX 600 index dropped 0.2% in early trading, tracking similar losses across all major regional bourses. Germany’s DAX declined 0.3%, France’s CAC 40 shed 0.2%, and London’s FTSE 100 added 0.2%.

Europe’s major oil and gas producers, such as Shell and BP rose 1.8% and 2.7%, while TotalEnergies gained 2.3%.

The selloff followed the breakdown of a fragile truce over the weekend. Iran announced the closure of the Strait of Hormuz “until further notice” following an attack on a commercial vessel and subsequent U.S. retaliatory strikes.

While the U.S. countered that the waterway remains open to lawful transit, the threat of an outright blockade along the channel sent energy markets into overdrive.

International oil benchmarks Brent crude surged more than 4.4%.

The downturn marks a reversal from last week’s performance, where European shares had managed to claw background. Tech stocks and chipmakers had driven a late-week rally, supported by temporary hopes of diplomatic progress and resilient international demand for artificial intelligence infrastructure.

However, those hard-fought gains were poised to erased should losses extend.

European Central Bank (ECB) Executive Board member Isabel Schnabel is scheduled to speak later in the day.

Investors will be parsing her remarks closely for any new guidance on the future path of interest rates, particularly given Schnabel’s established reputation as one of the central bank’s more hawkish policymakers who has consistently favoured a cautious approach to cutting borrowing costs.

Among individual stocks, Akzo Nobel gained 3% after Nippon Paint’s offer for the paint maker’s decorative paints business.