(Sharecast News) - European shares closed lower on Monday as stalled talks between the US and Iran kept pressure on risk sentiment and sent oil briefly beyond $108 a barrel, despite reports Tehran had offered to reopen the Strait of Hormuz without addressing its nuclear programme.
The pan-European Stoxx 600 fell 0.3% to 608.84.
Germany's DAX slipped 0.19% to 24,083.53, France's CAC 40 declined 0.19% to 8,141.92, and London's FTSE 100 dropped 0.56% to 10,321.09.
In commodities, Brent crude futures were last up 2.78% on ICE at $108.26 a barrel, while the NYMEX quote for West Texas Intermediate gained 1.86% to $96.16.
Chris Beauchamp, chief market analyst at IG, said a lack of US-Iran talks and the week's heavy calendar had weighed on markets.
"Monday's relatively empty calendar stands in stark contrast to the action-packed week that lies ahead of everyone, and so today's price action has fallen firmly into the 'snoozefest' category," he said.
"Hopes of US-Iran talks can only carry a market so far, and we have seen today's attempt at a rally wilt under concerns about this week's newsflow and renewed strength in oil prices."
Brent touched its highest level since a ceasefire was agreed between Washington and Tehran on 7 April, rising past $108 a barrel after US president Donald Trump cancelled plans to send envoys Steve Witkoff and Jared Kushner for talks in Pakistan on Saturday.
ABC News reported, citing two regional officials with knowledge of the proposal, that Iran was offering to end its chokehold on the Strait of Hormuz without addressing its nuclear programme.
The officials said Tehran also wanted the US to end its blockade of the country as part of the proposal.
Axios separately reported that Iran had tabled a new plan to reopen the strait and end the war, with nuclear negotiations postponed to a later date.
Patrick Munnelly, market strategy partner at TickMill, said: "The FTSE 100 faded into the afternoon on Monday, with early relief around a Middle East ceasefire and a firmer pound failing to translate into durable index upside.
"The tape had opened with a cleaner risk-on impulse, helped by hopes that geopolitical temperature was coming down, but the move narrowed quickly as investors treated the rally as something to sell rather than chase.
"By afternoon trade, London's blue-chip benchmark was reported lower, with the market still struggling to square ceasefire optimism against elevated oil, a stronger sterling backdrop and stretched year-to-date outperformance versus global peers."
German consumer sentiment falls sharply
Economic data added to the cautious tone as German consumer sentiment fell sharply, with the Nuremberg Institute for Market Decisions and GfK consumer climate indicator dropping to -33.3 from a revised -28.1, its lowest level in more than three years and worse than expectations for a reading near -29.5.
Income expectations plunged to -24.4 from -6.3, while willingness to buy fell 3.5 points to -14.4. Willingness to save eased 2.4 points to 16.1 but remained positive.
NIM attributed the downturn to the war in Iran, which has pushed global energy prices higher, weighed on growth prospects and revived inflation concerns.
German inflation rose to 2.7% from 1.9% in March.
"Income expectations are literally collapsing because of rising inflation. And in this context, people also currently believe that the timing for major purchases is less favourable," said Rolf Burkl, head of consumer climate at NIM.
In the UK, the CBI said high street conditions remained weak in April as deteriorating consumer confidence weighed on retailers.
Its distributive trades survey showed retail sales for the time of year were judged poor, with the balance falling to -32 from -23 in March.
Sales volumes also declined sharply, with the balance dropping 16 points to -68.
Expectations for May weakened, with sales forecast to fall short of seasonal norms at a balance of -43 and a sales volume balance of -60.
"Retail conditions deteriorated in April, with sales momentum weakening noticeably against a backdrop of fragile consumer confidence," said Martin Sartorius, lead economist at the CBI.
"With the economic impact of the Iran conflict becoming clearer, firms will be looking to the government to recognise that easing cost of living pressures depends on tackling the cost of doing business."
Shell slips on ARC deal, Hiab in the green
Among individual stocks, Shell fell 1.47% after the British oil major said it had agreed to buy Canadian energy company ARC Resources in a deal valued at $16.4bn.
On the upside, Hiab rose 5.09% after Danske Bank, Nordea and SEB all lifted their target prices on the stock.
Nordex jumped 6.21% after the German wind turbine maker reported a strong first quarter, with sales up 11% to 1.6bn, or $2.2bn, and net income rising to 53.6m from 7.9m a year earlier.
Other wind stocks also gained, with Oersted up 4.03% and Vestas Wind Systems 0.63% higher.
Banks were more subdued ahead of a busy week of quarterly earnings from European lenders.
Barclays rose 0.51%, BNP Paribas advanced 1.29%, Deutsche Bank gained 0.28%, and UBS added 1.84%.
Reporting by Josh White for Sharecast.com.
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