European Stocks Slide as Middle East Tensions Escalate

European stocks declined broadly on Monday as the military conflict in the Middle East showed no signs of abating, although energy and defense shares posted notable gains.

The pan-European STOXX 600 index fell 1.8%, hitting its lowest level since mid-February at 622.35 by 0812 GMT, retreating from a record high hit on Friday, with most sectors declining sharply, according to Reuters.

Shares in the travel and leisure sector, including airlines and hotels, recorded the biggest drop, falling 4.4%. Germany's Lufthansa fell 11% after extending the suspension of its flights due to the situation in the Middle East.

Banks also saw declines, with shares falling 3.6%, while insurance company stocks dropped 2%. Conversely, shares in defense companies such as BAE Systems, Rheinmetall, Saab and Leonardo rose between 5% and 8%.

Major energy firms, including Shell, BP and TotalEnergies, saw gains of more than 5% each after oil prices rose about 13% due to disrupted traffic in the vital Strait of Hormuz following retaliatory attacks. The energy index rose 3.5%.

New military strikes were launched by the United States and Israel. These actions followed weekend attacks that resulted in fatalities, prompting a barrage of missiles across the region, raising fears of a wider conflict and the potential involvement of neighboring countries.