European shares fall as oil prices surge amid US-Iran tensions

European shares moved lower on Monday as rising oil prices and continued bond sell-offs heightened inflation concerns, while the absence of any breakthrough between the United States and Iran kept investors cautious.

The pan-European STOXX 600 index slipped 0.7% to 602.52 points as of 0703 GMT, extending losses after ending the previous week in negative territory.

Germany’s DAX fell 0.5%, while France’s CAC 40 declined 1%.

Inflation concerns weigh on sentiment

Market sentiment remained under pressure as investors monitored escalating geopolitical tensions in the Middle East.

Rising energy prices continued to fuel concerns that inflation could remain elevated for longer, potentially forcing central banks to maintain tighter monetary policy or raise interest rates further.

A drone strike caused a fire at a nuclear power plant in the UAE, while Saudi Arabia reported intercepting three drones.

Meanwhile, US President Donald Trump warned that Iran must act fast.

The conflict involving the US, Israel, and Iran has now entered its third month, with Tehran and Washington still unable to resolve it.

The continued closure of the Strait of Hormuz, a vital global shipping route, added to fears surrounding energy supply disruptions.

Oil-dependent Europe under pressure

European equities remained vulnerable due to the region’s dependence on oil imports.

Rising crude prices have added pressure to corporate margins and economic growth expectations across the continent.

While global equity markets have recovered in recent months on optimism surrounding artificial intelligence-driven growth, European markets have struggled to regain levels seen before the conflict began.

The surge in energy prices also intensified concerns over broader inflationary pressures, which have contributed to weakness in bond markets.

Investors increasingly expect global central banks to maintain a hawkish stance amid persistent price risks.

Healthcare stocks mixed

Among individual stocks, AstraZeneca slipped 0.8% in early trading despite receiving approval in the United States for its hypertension pill.

The decline suggested that broader market weakness and investor caution overshadowed the positive regulatory development for the drugmaker.

In contrast, Sonova rose 4.1% after the hearing aid manufacturer projected stronger sales and earnings for the 2026/27 financial year.

The company’s upbeat forecast helped lift sentiment around the stock even as broader European markets traded lower.

Markets remain focused on geopolitical developments

Investors continued to closely monitor developments surrounding the Middle East conflict and any potential diplomatic progress between Washington and Tehran.

The ongoing uncertainty surrounding the Strait of Hormuz and energy supplies remained a key driver for financial markets, particularly in Europe, where higher oil prices have amplified concerns over inflation and economic stability.

With no signs of a near-term resolution, market participants appeared cautious at the start of the week, leading to declines across major European indexes and continued pressure on bonds.

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