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European equity markets declined sharply on Monday as global risk sentiment deteriorated following large-scale military strikes by the United States and Israel against Iran over the weekend.

By 08:05 GMT, Germany’s DAX had fallen 2.5%, France’s CAC 40 was down 2.1%, and the UK’s FTSE 100 dropped 0.8%.

Middle East conflict weighs on markets

Stock markets across Asia and Europe traded lower, while U.S. futures signalled further weakness ahead of the Wall Street open after the weekend attacks, which reportedly killed several senior Iranian figures, including Supreme Leader Ayatollah Ali Khamenei.

Iran responded with strikes targeting multiple locations across the Middle East, including U.S. military bases in the region.

There were few indications that tensions would ease soon, with U.S. President Donald Trump stating overnight that joint U.S. and Israeli military operations would continue and could extend for several weeks.

“We will not negotiate with the United States,” Iran’s top security official Ali Larijani said in a post on X on Monday, reinforcing Tehran’s tougher stance after earlier discussions last week about the possibility of a nuclear agreement with Washington.

Rally momentum at risk

The market decline followed a strong run for European equities, which had closed at record highs on Friday after eight consecutive months of gains supported by stronger-than-expected corporate results.

The pan-European STOXX 600 had just recorded its longest monthly winning streak since the 2012–2013 period.

Although the earnings season is nearing its end, several corporate updates remained in focus on Monday, even as the broader market tone shifted more cautious.

Smith & Nephew (LSE:SN.) reported a 15.5% increase in annual profit, reflecting progress in its turnaround strategy, which has delivered cost efficiencies and supported growth across business segments.

Bunzl (LSE:BNZL) posted a 9.8% decline in annual adjusted pretax profit, as weaker trading conditions in its key North American division were compounded by supply-chain disruptions linked to tariffs.

Galp Energia (EU:GALP) highlighted solid operational performance in 2025, supported by strong cash generation and a resilient balance sheet despite softer oil prices.

Economic data in focus

On the macroeconomic front, German retail sales declined more sharply than expected in January, falling 0.9% month on month compared with forecasts for a 0.2% drop, according to data released Monday.

In the UK, house prices rose 0.3% in February, leaving prices 1.0% higher than a year earlier, according to figures from mortgage lender Nationwide Building Society.

Investors are also awaiting the final February reading of the Eurozone manufacturing PMI later in the day, which is expected to confirm that the sector returned to expansion last month.

Oil prices jump

Oil markets rallied strongly on Monday after Iranian retaliatory strikes disrupted shipping activity in the strategically important Strait of Hormuz.

Brent crude futures surged 9.6% to $79.85 per barrel — their highest level since January 2025 — while U.S. West Texas Intermediate futures climbed 9.3% to $73.22 per barrel, the strongest level since June.

The spike followed reports that three oil tankers were damaged while transiting the Strait of Hormuz, a key maritime route linking the Gulf with the Arabian Sea.

On a typical day, shipments equivalent to roughly one-fifth of global oil demand pass through the strait, carrying crude exports from Saudi Arabia, the UAE, Iraq, Iran and Kuwait.

A prolonged disruption or closure of the passage could push oil prices significantly higher and create supply shortages for major importing nations such as China and India.

UK equities opened lower on Monday while the British pound slipped to around $1.33, as escalating tensions involving Iran, the United States and Israel dampened investor sentiment. Market participants remain sceptical that the current geopolitical flare-up will ease in the near term.

Recent developments showed U.S. President Donald Trump expressing willingness to engage with Iran’s new leadership, while senior Iranian official Ali Larijani indicated that Tehran is not ready to enter talks with Washington.

Investors are heading into a busy week in which market direction is expected to be heavily influenced by geopolitical headlines and any indications that tensions could begin to de-escalate.

“From a market perspective, we see further downside in the coming days. We had lowered our risk profile early last week as we thought that the market was being too complacent around geopolitical risks. We are still happy to remain in the low risk mode and keeping our powder dry. At some point we would be ready to buy the dip, but that some point seems far for now,” according to a Jefferies economist.

As of 08:14 GMT, the FTSE 100 index was down 0.7%, while the pound weakened roughly 1% against the U.S. dollar to 1.3352. European markets also declined, with Germany’s DAX falling 2.3% and France’s CAC 40 dropping 1.7%.

UK market roundup

Smith+Nephew PLC (LSE:SN.) reported fourth-quarter revenue that exceeded consensus forecasts by 1.6%, while reiterating its full-year 2026 guidance despite ongoing market headwinds. The medical technology group delivered underlying revenue growth of 6.2% in the quarter, beating expectations by around 1.5 percentage points. Second-half EBIT margin exceeded consensus by 7 basis points, and earnings per share came in 2.6% ahead of forecasts.

Bunzl (LSE:BNZL) released full-year results broadly in line with expectations, showing modest improvement in organic growth during the fourth quarter and a slower pace of margin compression in the second half. Revenue grew 3% excluding currency effects, at the top end of its 2%–3% guidance range, while organic growth reached 0.4% compared with flat guidance. Adjusted EBIT declined 7% to £910 million, slightly above the £896 million consensus estimate. Operating margin fell 60 basis points to 7.7%, though the rate of decline eased in the second half, driven by improved performance in North America.

Oxford Nanopore Technologies PLC (LSE:ONT) issued 2026 revenue guidance below analyst expectations but projected tighter control over operating expenses. The company forecasts revenue growth of 21–25% at constant exchange rates, compared with consensus expectations of 27.5% on a reported basis. Currency movements are expected to create a headwind of around 1.5 percentage points. Operating expenses excluding depreciation and amortisation are expected to rise between 0% and 5%, below the company’s typical annual range of 3%–8%.

Big Yellow Group (LSE:BYG) confirmed that Chief Executive Jim Gibson will retire on July 20 following the company’s Annual General Meeting, with Chief Operating Officer John Hunter set to succeed him. Gibson, who co-founded the company in September 1998 and has served as CEO since 2003, is widely credited with building Big Yellow into a market leader after launching the business from a small 600-square-foot office in Bagshot.

Meanwhile, UK house prices edged higher in February, according to Nationwide data. The average property price rose by 0.3%, or £817, to £273,176 on a seasonally adjusted basis, matching January’s increase. On an annual basis, prices were up 1%, or £2,660, compared with February 2025 — a slight acceleration from the 0.99% yearly growth recorded the previous month. Housebuilders have indicated that prices have remained largely stable so far this year.

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.

European equities showed a mixed performance on Friday, with investors remaining cautious amid ongoing concerns about job losses and workplace disruption linked to the rapid adoption of artificial intelligence.

Block (NYSE:XYZ), the payments company led by Twitter co-founder and CEO Jack Dorsey, recently announced plans to cut roughly 40% of its workforce as automation driven by artificial intelligence reshapes operations.

On the macroeconomic front, U.K. consumer confidence unexpectedly weakened in February, falling to its lowest level in three months instead of posting the modest improvement economists had anticipated.

The U.K. consumer confidence index declined to -19 from -16 in January, according to the Consumer Confidence Barometer compiled by GfK and the Nuremberg Institute for Market Decisions (NIM). Economists had forecast a slight rise to -15, making the latest reading the weakest since November.

Sterling slipped to a more than two-month low against the euro amid political uncertainty following a Green Party victory in a special election in England.

The euro traded within a tight range against the U.S. dollar after reports indicated the European Central Bank reduced its exposure to dollar assets in early 2025.

Among major benchmarks, London’s FTSE 100 gained 0.3%, while Germany’s DAX fell 0.2% and France’s CAC 40 declined 0.6%.

At the stock level, French steel pipe manufacturer Vallourec (EU:VK) advanced after reporting fourth-quarter revenue that exceeded expectations.

Swiss reinsurer Swiss Re (TG:SR9) also posted strong gains after announcing a 47% increase in net profit for 2025.

In contrast, London-listed recruitment firm Hays (LSE:HAS) dropped sharply following a significant decline in first-half earnings.

Melrose (LSE:MRO), owner of GKN Aerospace, also fell after issuing a 2026 revenue outlook below market forecasts.

Belgian telecom group Proximus (EU:PROX) moved notably lower after announcing job reductions and dividend cuts following a 6.6% year-over-year revenue decline in the fourth quarter.

German online food delivery platform Delivery Hero (TG:DHER) also declined after reporting annual gross merchandise value (GMV) slightly below analyst expectations.

European equity markets traded cautiously on Friday as investors reviewed another round of corporate earnings while monitoring key inflation releases toward the close of a busy week.

At 08:10 GMT, Germany’s DAX was broadly unchanged, France’s CAC 40 edged down 0.1%, and the U.K.’s FTSE 100 gained 0.2%.

Earnings season remains in focus

Investors continued to analyse company results as Europe’s reporting season approached its final stages. More than half of companies in the STOXX 600 have now released fourth-quarter figures, with overall earnings slightly exceeding expectations — a trend that helped push the benchmark index to record highs on Thursday.

Swiss Re (TG:SR9) reported record annual net income of $4.76 billion, representing a 47% increase year over year. However, the reinsurer’s life and health division fell short of targets after booking a $650 million charge linked to assumption updates affecting underperforming portfolios in Australia, Israel, and South Korea.

BASF (TG:BAS) announced a 9.5% decline in full-year earnings, with its core chemicals division nearly breaking even during the fourth quarter. The German chemicals group relied heavily on reduced capital spending to support free cash flow generation.

Holcim (TG:HLBN) achieved a record recurring EBIT margin of 18.3% in 2025, an improvement of 80 basis points, following the spin-off of its North American operations and new acquisition agreements involving European walling manufacturer Xella and a majority stake in Peru’s Cementos Pacasmayo.

Melrose Industries (LSE:MRO) posted a 23% increase in adjusted operating profit for 2025 and returned to positive free cash flow for the first time in two years. Net debt rose, however, as the British aerospace and defence group distributed £255 million to shareholders through dividends and share buybacks.

Netflix steps back from Warner Bros bidding contest

In U.S. corporate developments, Netflix (NASDAQ:NFLX) said Thursday it would not increase its bid for Warner Bros Discovery (NASDAQ:WBD) after Warner Bros concluded that a revised offer from Paramount Skydance (NASDAQ:PSKY) qualified as a superior proposal under the terms of its merger agreement with the streaming company.

“We’ve always been disciplined, and at the price required to match Paramount Skydance’s latest offer, the deal is no longer financially attractive, so we are declining to match the Paramount Skydance bid,” Netflix co-CEOs Ted Sarandos and Greg Peters said in a statement.

Inflation data draws attention

On the macroeconomic front, France reported fourth-quarter GDP growth of 0.2%, matching expectations. Consumer prices in the country rose 0.7% in February after declining 0.3% the previous month.

Germany’s inflation figures are due later in the session, with European Central Bank policymakers expected to scrutinise the data closely ahead of their next monetary policy meeting scheduled for mid-next month.

Oil prices head toward weekly decline

Oil markets moved slightly higher on Friday but remained on track for weekly losses after the United States and Iran agreed to continue discussions over Tehran’s nuclear programme, easing fears of supply disruptions linked to escalating geopolitical tensions.

Brent crude futures rose 0.7% to $71.29 per barrel, while U.S. West Texas Intermediate futures gained 0.8% to $65.74 per barrel.

For the week, Brent prices were broadly flat, while WTI was set to decline by roughly 1%, partially reversing gains from the previous week.

Negotiations between Washington and Tehran concluded Thursday without a definitive agreement, but both sides plan to resume technical-level talks next week in Vienna, according to Omani Foreign Minister Sayyid Badr Albusaidi in a post on X following meetings in Geneva.

Tensions surrounding Iran have been a key influence on oil markets throughout February, as the United States deployed significant military assets to the Middle East and warned of potential action should Tehran reject a negotiated settlement.