Europe stocks fall on fears of Iranian retaliation after US strikes

FRANKFURT: European stocks stumbled on Monday, as investors nervously eyed the threat of Iranian retaliation following joint US-Israeli strikes on Iran’s nuclear sites over the weekend.

The pan-European STOXX 600 index closed 0.3% lower, after touching its lowest level in over a month earlier in the session.

Other major bourses also closed in the red, with Germany down 0.3%, France down 0.7%, Britain’s FTSE down 0.2%, while Spain’s was flat.

A Reuters report said that Iran could soon strike back at American forces in the Middle East, even as US officials scramble for a diplomatic solution to avert conflict.

Tensions soared after US warplanes joined Israel in bombing Iran’s nuclear facilities over the weekend, prompting Iran to brand

President Donald Trump a “gambler” for escalating the standoff.

With aerial assaults between Israel and Iran showing no sign of slowing, jittery markets braced for the possibility that Iran might retaliate by shutting the Strait of Hormuz—the world’s most crucial oil passageway.

Investors rushed into safe-haven assets, driving up gold prices and eurozone bonds. Meanwhile, the utilities sector , often seen as a bond proxy, outperformed the STOXX 600 sectors.

Meanwhile, sources said that Germany will raise defence spending to 3.5% of economic output by 2029 funded through a nearly 400 billion euro borrowing programme.

Still, Europe’s aerospace and defence stocks lost 0.7%.

The US attacks on Iranian nuclear facilities could very well succeed in eliminating a nuclear capable Iran,” said David Bahnsen, chief investment officer, The Bahnsen.

“There is still plenty of risk for short-term volatility driven by the uncertainty of the possibility of Iranian retaliation or a protracted conflict in the region.”

Meanwhile, the July 8 US tariff-pause deadline approaches with little progress on trade deals with Washington, with only a US-UK formal deal reached.

On the data front, fresh data showed euro zone’s economy flat lined for a second month in June, barely expanding, as the bloc’s dominant services industry showed only a small sign of improvement and manufacturing displayed none at all.