European Stocks Slump as Markets Fear US-Iran Conflict and High Oil Prices

European equities opened lower on Monday as oil prices extended their rally amid escalating US-Iran strikes, with the pan-European STOXX 600 slipping 0.2%, London's FTSE 100 down 0.4% and Germany's DAX off 0.2%. The declines extended a subdued mood that had already gripped the region after last week's sharp selloff in global technology stocks, as investors reassessed the sustainability of artificial-intelligence-related spending.

The renewed pressure traces directly back to the Middle East: Brent crude climbed a further 2.2% on Monday alone, adding to a nearly 16% weekly surge, as the US-Iran conflict entered its ninth consecutive day of American strikes and shipping through the Strait of Hormuz remained severely constrained. Higher energy costs feed directly into eurozone inflation, which is why European government bond yields have also been climbing alongside oil, dampening appetite for risk assets.

The clearest casualty was Ryanair, whose shares fell as much as 7% to sit at the bottom of the STOXX 600 after first-quarter profit dropped 34% to 538 million euros ($615.3 million), hurt by unhedged jet-fuel costs that roughly doubled to near $150 a barrel during the quarter and a 6% drop in average fares. Lufthansa fell more than 2% on the same read-through. Energy names moved the other way: TotalEnergies gained 1.4%, Siemens Energy rose 2.5%, and ASML added 0.8%.

Investors are now looking to Thursday's European Central Bank meeting, where the Governing Council will decide whether June's 25-basis-point rate hike, which lifted the deposit rate to 2.25%, was sufficient or whether persistent energy-driven inflation forces further tightening. With Q2 tech earnings season also underway, the next few sessions could hinge as much on corporate guidance as on developments in the Strait of Hormuz.