Global Market: European stocks edge lower as Middle East escalation dampens investor sentiment

European equities traded lower on Monday as mounting tensions between the United States and Iran unsettled global markets after Tehran moved to close the Strait of Hormuz, raising fresh concerns over oil supplies and regional stability, Reuters reported.

The pan-European STOXX 600 index slipped 0.3% to 639.29 in early trade, extending losses after posting its biggest weekly decline since late April in the previous session.

The latest escalation has also clouded the outlook for the U.S.-Iran agreement reached last month, which was intended to restore shipping through the Strait of Hormuz and serve as a foundation for broader diplomatic negotiations, Reuters reported. Investors are now reassessing the geopolitical landscape as fears of prolonged disruption to one of the world's most critical energy routes grow.


Rising geopolitical risks pushed crude oil prices more than 4% higher, lifting European energy shares. The STOXX 600 energy index advanced 1.6%, making it one of the strongest-performing sectors in early trading.

Technology stocks, however, weighed on the broader market, falling 1.2%. The weakness followed declines across Asian semiconductor shares after AI memory chip leader SK Hynix made a strong Nasdaq debut on Friday, with its shares climbing 12.8%. Despite the positive listing, investors remained cautious about elevated valuations across the technology sector ahead of earnings season.

Market participants are now looking to the upcoming corporate earnings season for evidence that company profits can continue to support current equity valuations, particularly among high-growth technology firms.

In company-specific news, AkzoNobel gained around 3% after Japan's Nippon Paint offered €7.5 billion ($8.55 billion) to acquire the Dutch company's decorative paints business, providing a bright spot in an otherwise subdued trading session.

With geopolitical tensions intensifying and earnings season set to begin, investors are expected to remain focused on developments in the Middle East and their potential impact on global markets, Reuters reported.