Europe close: Markets falter as oil prices climb on Hormuz blockade

(Sharecast News) - European equities traded lower on Monday as oil prices surged above $100 a barrel after US president Donald Trump said he would begin a blockade of Iranian oil exports through the Strait of Hormuz, following the collapse of peace talks with Tehran over the weekend.

"Stocks mostly pull back as the escalation in the Middle East conflict lifts oil prices above $100 per barrel and maintains risks of stagflation," said Axel Rudolph, chief technical analyst at IG.

The pan-European Stoxx 600 fell 0.16% to 613.88, with Germany's DAX down 0.26% at 23,742.44 and France's CAC 40 slipping 0.29% to 8,235.98.

London's FTSE 100 declined 0.17% to 10,582.96.

In contrast, Hungary's BUX index jumped nearly 5% after Viktor Orban was voted out of office after 16 years, with Peter Magyar's Tisza party projected to secure 138 of 199 parliamentary seats with 98.74% of votes counted, giving it a constitutional super-majority seen as supportive of closer EU relations.

Rudolph added that "Hungary's stock market surged to a record high, with the Budapest Stock Exchange gaining over 2% on optimism around political and economic reforms following a decisive election victory by Peter Magyar."

Oil markets were a key driver of sentiment, with Brent crude futures last up 6.47% on ICE at $101.36 a barrel, and the NYMEX quote for West Texas Intermediate rising 5.76% to $102.13, as traders reacted to the prospect of supply disruptions.

The escalation follows the failure of negotiations in Islamabad, where US vice-president JD Vance said Washington had presented a "final and best offer" that Iran declined, adding that "we have not reached an agreement".

Rudolph said "Oil prices surged back above $100 per barrel after the US announced a blockade targeting Iranian-linked shipping through the Strait of Hormuz, following the collapse of negotiations with Tehran," adding that the move "reinforced concerns over prolonged disruption to a key global energy artery".

Energy markets had been under sustained pressure since the US first attacked Iran, with refinery outages and heightened risks around the Strait of Hormuz - through which roughly 20% of global oil supply passes - disrupting flows.

A temporary ceasefire last week had eased prices, but its breakdown and the planned US naval blockade, due to begin at 1000 EDT Monday, renewed fears of prolonged disruption.

Tehran warned it could retaliate by targeting Gulf ports.

Rudolph also warned that "OPEC data showed a steep drop in March output across major producers, underlining the scale of the supply shock and its inflationary implications."

Russ Mould, investment director at AJ Bell, said: "Against this backdrop, oil above $100 a barrel is not a surprise, and the longer it persists at this level, the greater the scars for the global economy.

"The stagflation word is being widely aired once again as geopolitical turmoil threatens to stymie international growth and stoke inflationary pressures."

Susannah Streeter, chief investment strategist at Wealth Club, added: "By blockading the Strait of Hormuz, Trump [will turn] Iran's chokepoint into a US stranglehold.

"The prospect of all tankers ceasing transit through this key waterway is making the energy crisis even more acute."

Travel stocks lose out as energy shares rise

Equity moves reflected the impact of higher fuel costs and geopolitical risk.

Travel and leisure stocks led losses, with Wizz Air down 5.44%, Deutsche Lufthansa falling 2.24%, easyJet dropping 3.65%, Ryanair losing 1.77%, TUI down 1.57% and Carnival declining 2.62%.

Patrick Munnelly, market strategy partner at TickMill said "Travel and leisure stocks struggled under the weight of rising fuel costs," noting that "airlines faced even greater losses."

In contrast, energy stocks benefited from rising crude prices, with BP up 0.89%, Equinor gaining 2.46%, Var Energi jumping 4.27% and Repsol edging 0.32% higher.

Munnelly added that "Energy shares, by contrast, gained as higher oil prices lifted Shell and BP."

Reporting by Josh White for Sharecast.com.