Europe midday: Oil price rise cools as mkts await Iran response to attacks

(Sharecast News) - European shares opened were lower on Monday as investors took a risk-off position in response to US attacks on Iran's nuclear installations over the weekend, although a predicted spike in oil prices dissipated.

The pan-regional Stoxx 600 was down 0.22% at 535.36 in early deals with all major bourses lower. Oil price gains tapered after an initial 4% jump to more than $81 a barrel to just above $74 a barrel - a rise of 0.7%.

International Monetary Fund head Kristalina Georgieva warned that the attacks could hit global growth and warned of "secondary and tertiary" economic impacts.

"Let's say there is more turbulence that goes into hitting growth prospects in large economies - then you have a trigger impact of downward revisions in prospects for global growth," she said.

US forces on the weekend launched a surprise attack against three nuclear sites in Fordo, Isfahan and Natanz. US President Donald Trump on Friday said initially that he would make a decision to attack Iran "within the next two weeks" and join Israel's war against its neighbour.

Iran's regime threatened to close the Strait of Hormuz - a key oil supply gateway - creating inflationary fears among investors. Goldman Sachs analysts predicted that disruptions to shipping through the strait could push the price of Brent crude beyond $100 a barrel - its highest level since August 2022.

"The next turn of events will inevitably dictate investor sentiment, with traders currently braced for retaliatory Iranian action, as well as keeping a close eye on the Strait of Hormuz, where a disruption of oil flows could follow," said Interactive Investor head of markets Richard Hunter.

"At the moment, the recent spike in the oil price has led to a gain of 4.8% so far this year, but perhaps of equal concern is the inflationary effect the rising level could have."

The news boosted oil stocks with Galp, BP, Equinor and Shell all up. However, shares in airlines were hit on the threat of higher fuel costs and flight cancellations to the troubled Middle East.

In economic news, private economic activity across the eurozone showed tepid growth again this month, according to a closely watched survey by S&P Global and Hamburg Commercial Bank.

The flash reading of the eurozone composite purchasing managers' index (PMI) came in at 50.2 for June, unchanged from May's reading.

This was the sixth straight month of a reading above the neutral mark of 50.0, which separates growth from contraction, but came in under the consensus forecast of 50.5.

The service-sector PMI rose to 50.0 from 49.7, while the manufacturing PMI was unchanged at 49.4 as the manufacturing PMI out index fell to 51.0 from 51.5.

Reporting by Frank Prenesti for Sharecast.com