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(Sharecast News) - European shares were lower on Monday as investors feared the US-Iran conflict could spark again after shipping was attacked in the Strait of Hormuz while American forces seized an Iranian-flagged cargo ship in the Gulf of Oman.
The pan-regional Stoxx 600 index was down 1.07% to 619 at 1220 BST with all major bourses in the red.
US President Donald Trump on Sunday said an American destroyer had fired on and disabled the Iranian vessel which he claimed was trying to run the American blockade before it was boarded and seized by marines.
Meanwhile, Iran declared the key Hormuz strait closed again and fired on commercial vessels trying to transit. Tehran warned on Monday that it would retaliate for the seizure of the cargo ship and also said it would not participate in a second round of talks the US had hoped to begin before the ceasefire expires on Tuesday.
"Today's jump in oil prices and the pullback in stocks is a reminder that the current ceasefire that expires on Wednesday is fragile. The latest round of peace talks in Pakistan scheduled for Monday are now in jeopardy. Although a US delegation is in the region, Iran has rebuffed these talks, and it is unclear if they will take place," said XTB research director Kathleen Brooks.
"Failed negotiations at this stage is problematic since it is an obstacle to negotiating a longer ceasefire, the current one expires on Wednesday. Unless relations between the US and Iran improve in the next two days, we could see a resumption of the bombing campaigns from both sides, and more volatility for financial markets."
Oil prices gained in line with fears of a resumption of hostilities. Brent crude was up 5.27% to $95.15, while US West Texas Intermediate gained 5.86% to $88.76 a barrel. Energy stocks Equinor, Aker BP, ENI, BP and Shell were higher as a result.
Airlines, sensitive to any move in oil prices, fell, with Ryanair, Lufthansa and easyJet down.
Loomis fell on a downgrade by Goldman Sachs to 'neutral' from 'buy'.
Reporting by Frank Prenesti for Sharecast.com
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