Europe’s STOXX 600 share index fell to a two-week low on Monday, pressured by rising Middle East tensions and a continued global selloff in AI-related stocks, while takeover activity in Italy lifted one domestic lender.
By 0812 GMT the pan-European STOXX 600 was down 0.9% at 616.04 points, with all major regional indexes trading in negative territory. A spike in crude oil prices - up more than 4% after Israel and Iran exchanged fire over the weekend - added to market unease, threatening a fragile ceasefire in the region and diminishing hopes for a swift resolution to the conflict.
Energy-sensitive sectors felt direct pressure from the jump in oil. Airlines were among the notable decliners, with carriers such as Lufthansa and Air France each falling by more than 2% as higher fuel costs feed through to operating margins.
Technology stocks were also a leading drag, sliding 2.1% as European tech firms tracked sharp sector losses seen abroad late last week in the United States and in Asia on Monday. Semiconductor and components names underperformed, with Infineon down 1.7% and BE Semiconductor off 3.8%. Equipment suppliers tied to artificial intelligence deployments also retreated, with Legrand and Schneider Electric each losing about 2%.
Despite the recent pullback, European technology has recorded the strongest quarterly gains among STOXX 600 sectors so far this quarter.
Macro developments added to the backdrop. A stronger-than-expected U.S. jobs report has been interpreted as giving the Federal Reserve more scope to hold interest rates steady for now, while market participants are still factoring in the possibility of a rate increase in December. Attention in Europe has shifted toward the European Central Bank’s policy decision due on Thursday, where markets have already priced in a 25-basis-point interest rate hike.
In corporate news, Italian bank Monte dei Paschi di Siena rallied after a rival struck a takeover bid. Monte dei Paschi jumped 9.5% following an unsolicited cash-and-share offer from Italy’s largest banking group, Intesa Sanpaolo, valued at 30.6 billion. Shares of Intesa Sanpaolo fell 3.2% on the announcement.
Market context:
- Broad-based selling pushed the STOXX 600 to a two-week low, with energy, airlines and technology among the worst hit.
- Crude oil rose sharply amid military exchanges between Israel and Iran, raising input-cost concerns for energy-dependent sectors across Europe.
- Monetary policy considerations - a stronger U.S. jobs report and an ECB decision priced for a 25-basis-point hike - are adding to investor caution.