UPDATE 2-European shares slide as Middle East ceasefire hangs in balance

European shares declined on Monday, on ‌concerns ​that a ceasefire between the U.S. and Iran might collapse after Washington said it had seized an Iranian cargo ship that tried to run its blockade and Tehran vowed to retaliate. Iran ‌said it would not participate in a second round of negotiations that the U.S. had hoped would kick off before the ceasefire expires on Tuesday.

The pan-European STOXX 600 index was down 1.1% at 619.67 points as of 0855 GMT. Other major regional markets also fell, with ‌France's CAC and Germany's DAX down 1% and 1.6%, respectively. The moves mark a sharp reversal from last Friday's optimism, which ‌led to the STOXX 600 jumping more than 1% to post its fourth straight weekly rise after Iran declared the Strait of Hormuz open.

European equities are struggling to fully recoup losses sustained since the war erupted in late February, with shares in the region lagging their U.S. counterparts as elevated oil prices weigh heavily ⁠on energy-dependent ​economies, keeping investors on edge. "The reason ⁠we are seeing markets under pressure this morning is because of the reintroduction of the question mark as to what exactly is happening in the peace ⁠talks between the U.S. and Iran," said Daniela Hathorn, senior market analyst at Capital.com.

"European equities haven't done poorly, they're lagging behind the U.S. peers as ​the U.S. is simply better positioned to weather the current crisis with less economic damage than Europe." The U.S. has maintained ⁠a blockade of Iranian ports, while Iran has lifted and then reimposed its own blockade in the Strait of Hormuz, which typically handles roughly one-fifth of the world's ⁠oil ​supply.

Energy shares gained 1.7% as crude prices surged. British majors BP and Shell and France's TotalEnergies fell between 2.5% and 3.1%. On the flip side, the travel and leisure sector led declines with a 2.5% fall, bearing the brunt of higher energy costs and ⁠rising geopolitical tensions.

Airline stocks, including easyJet, Lufthansa , Ryanair and IAG plunged between 3.1% and 4%, languishing near the bottom of the ⁠index. Banks and automobile stocks dropped ⁠2.3% each, while luxury stocks fell 2.2%.

Among shares, Renishaw jumped 6.7% after the engineering firm raised its 2026 revenue and profit forecasts. Loomis fell 6% to become the top loser on the European ‌benchmark, after Goldman Sachs ‌downgraded the cash logistics company's shares to "neutral" from "buy".