European Stocks Close Lower

European stocks closed firmly lower on Monday, pulling back from robust morning trading after setbacks to an agreement between the US and Iran worsened the outlook for global energy supply. The Euro STOXX 50 fell 0.5% to 6,023 and the STOXX Europe 600 lost 0.9% to 620. Official Iranian media stated that Tehran would halt talks with the US and extend the blockade on the Strait of Hormuz due to Israel's attacks on Lebanon. Energy prices surged and sovereign yields in the Eurozone rose sharply, denting growth prospects should an agreement that restores tanker flows not be reached soon. Intesa Sanpaolo and Allianz dropped 1.8% due to the rise in yields, while Airbus, Safran, and Siemens energy lost on higher energy costs. In turn, SAP surged 8%, tracking US software giants after Nvidia announced it will produce chips for personal computers.

European stocks started June on a weaker footing, with both the STOXX 50 and STOXX 600 slipping around 0.1%. Investor sentiment remained fragile amid ongoing geopolitical tensions in the Middle East, as the absence of a longer-term agreement between the US and Iran to end hostilities and fully reopen the Strait of Hormuz continued to fuel uncertainty. Over the weekend, the US said it had struck Iranian military sites, while Iran's Revolutionary Guards claimed they had targeted US interests in retaliation. Among individual stocks, Unilever (-1.0%), Airbus (-1.3%), Safran (-1.4%), and Intesa Sanpaolo (-0.8%) were down. In contrast, SAP (+2.0%) and Schneider Electric (+2.6%) outperformed, and the tech sector touched 2020-highs after the SoftBank Group pledged to invest €45 billion in France over the next five years to build AI infrastructure. Elsewhere, EasyJet surged more than 11% after stating that it had not received any takeover approach from Castlelake.

European equity markets were on track for a lower open on Monday as the lack of a longer-term agreement between the US and Iran to end hostilities and fully reopen the Strait of Hormuz kept investors on edge. Meanwhile, European Central Bank board member Isabel Schnabel warned that the growing adoption of stablecoins, most of which are tied to the US dollar, could weaken the euro’s role and reduce some countries’ control over monetary policy. She also reiterated comments from last week suggesting that the ECB should consider raising interest rates this month even if a US-Iran peace agreement is reached. In premarket trading, Euro Stoxx 50 and Stoxx 600 futures were both down about 0.3%, pointing to a softer start for European markets.