Key facts
- Europe's STOXX 600 index fell 0.7% to 618.42 points by 0828 GMT.
- All major regional indexes were also in the red.
- Crude oil prices jumped over 4% following exchanges of fire between Israel and Iran.
- Airlines like Lufthansa and Air France slipped about 2% each.
- Monte dei Paschi di Siena gained 10.7% after Intesa Sanpaolo announced a €30.6 billion bid.
- Intesa Sanpaolo shares slipped 4.1% on the news.
- European tech shares have seen significant gains this quarter.
- The European Central Bank is expected to announce a 25-basis-point interest rate hike on Thursday.
- Goldman Sachs noted downturn risk for European chemicals due to demand destruction and Chinese export pressure.
Europe's STOXX 600 share index fell to a two-week low on Monday, impacted by escalating Middle East tensions and a global selloff in AI stocks. The pan-European index slipped 0.7% to 618.42 points by 0828 GMT, with all major regional indexes also trading lower.
Crude oil prices surged over 4% after Israel and Iran exchanged fire over the weekend, raising concerns about regional stability and the fragile ceasefire. This development led to losses in energy-price sensitive sectors, with airlines like Lufthansa and Air France declining approximately 2% each. The International Air Transport Association (IATA) significantly reduced its annual profit forecast due to the fuel shock.
The Italian banking sector was also a focal point, with Monte dei Paschi di Siena (MPS) shares jumping 10.7% following an unsolicited cash-and-share bid valued at €30.6 billion ($35 billion) from rival Intesa Sanpaolo. Intesa Sanpaolo's shares fell 4.1% on the news. Analysts noted potential long-term benefits for Intesa but also substantial execution uncertainty. This bid followed a previous merger proposal for MPS from Banco BPM, which saw its shares trade marginally lower.
Globally, the tech sector experienced sharp losses, mirroring declines seen in the U.S. and Asia. European tech shares, despite recent strong quarterly gains, saw companies like ASM International slip 1.8%, while AI equipment makers Legrand and Schneider Electric dipped over 1%.
Market participants are now awaiting the European Central Bank's rate decision on Thursday, with a 25-basis-point hike largely priced in. Meanwhile, resilient U.S. jobs data has led investors to anticipate hawkish monetary policy from the Federal Reserve this year. Additionally, Goldman Sachs highlighted a downturn risk for European chemicals, citing demand destruction and competitive pressure from Chinese exports, contributing to a 1% decline in the chemical sector.