The pan-European STOXX 600 index fell 0.9% to 616.04 points by 0812 GMT on Monday, as escalating tensions in the Middle East and concerns over the tech sector weighed on investor sentiment.
The decline in the STOXX 600 was mirrored across major regional indexes, all of which were in the red. Crude oil prices surged over 4% after Israel and Iran exchanged fire over the weekend, threatening a fragile ceasefire and raising energy costs in Europe. This increase in energy prices hit airlines like Lufthansa and Air France, which saw their shares fall by more than 2% each.
Tech stocks were among the hardest hit, dropping 2.1% following significant losses in the U.S. and Asian markets. Notable declines included Infineon, which slipped 1.7%, and BE Semiconductor, which lost 3.8%. AI equipment manufacturers Legrand and Schneider Electric also fell by about 2% each. Despite this downturn, European tech shares have recorded the largest quarterly gains among STOXX 600 sectors this quarter.
A stronger-than-expected U.S. jobs report has provided the Federal Reserve with more flexibility to maintain current interest rates, although a December rate hike remains a possibility. Investors are now focusing on the European Central Bank's rate decision, expected on Thursday, with markets anticipating a 25-basis-point increase.
In merger and acquisition news, Italian bank Monte dei Paschi di Siena (MPS) surged 9.5% after Intesa Sanpaolo, Italy's largest banking group, announced a €30.6 billion ($35 billion) unsolicited cash-and-share bid to acquire the rival lender. Intesa's shares, however, fell by 3.2%.
Background
The current market volatility underscores the impact of geopolitical tensions and sector-specific challenges on European markets.
Investors should closely monitor the ECB's upcoming rate decision and ongoing developments in the Middle East for further market direction.
