European equity markets headed into a volatile, risk-averse start to the week after U.S. and Israeli forces carried out strikes on Iran, prompting investors to shift toward energy and defence shares while airline and consumer-focused sectors came under pressure.
Major oil and gas companies recorded notable gains, with BP (LSE:BP.), Shell (LSE:SHEL), Var Energi, Equinor, Galp (EU:GALP), TTE (EU:TTE), and Repsol (TG:REP) advancing between roughly 3.5% and 7% by 08:52 GMT.
Defence stocks also moved sharply higher. BAE Systems (LSE:BA.) rose more than 7%, Renk Group (TG:R3NK) gained 6.3%, and Hensoldt (TG:HAG) surged 7.5%. Rheinmetall (TG:RHM), Leonardo (BIT:LDO), and Thales (EU:HO) also posted solid increases, climbing between 4% and 6%.
Monday should see “volatility and selling in tech and cyclicals, and the reason for that is that, because of the actions that we’ve seen, there will be a significant risk that rising energy prices penalizes growth,” said Matt Gertken, chief geopolitical and U.S. political strategist at BCA Research.
“We should globally see defensives and energy outperform,” he added.
The renewed escalation in the Middle East has added further upward pressure to oil and gas prices. Market strategists generally expect heightened geopolitical risks to drive investor flows into traditionally defensive sectors such as utilities and healthcare, which historically perform more resiliently during periods of economic uncertainty.
Conversely, higher-beta growth stocks and economically sensitive sectors — including industrials and financials — may face renewed selling pressure as investors reassess risk exposure.
Oil futures surged more than 8% on Monday, reaching multi-month highs following the military strikes and Iran’s response.
Analysts noted that crude prices are likely to stay elevated in the near term as markets assess potential supply disruptions, particularly shipments passing through the Strait of Hormuz, a route responsible for more than one-fifth of global oil transport.
Citi analysts said in a note they expect Brent crude to trade in an $80–$90 per barrel range in their base case over at least this week, while adding that prices could retreat toward $70 if tensions ease.
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