European shares muted as markets weigh US-Iran deadlock

FRANKFURT: European shares ended Monday’s session flat, constrained by a drop in luxury stocks, while stalled US-Iran peace negotiations drove oil prices higher and also kept investors cautious.

The pan-European STOXX 600 closed little changed at 612.79 points. Regional indexes moved in different directions, with Italian stocks edging 0.8 percent higher, while France’s CAC 40 slipped 0.7 percent.

Luxury stocks led declines among sectors, falling 3.4 percent and were also the worst performing on the STOXX 600 this year. LVMH lost more than 4.4 percent, while Hermes and Burberry fell more than 3.3 percent each.

Berenberg analysts said that the conflict in the Middle East masked the reality that underlying demand globally was still weak, making the sector’s outlook fragile.

Global uncertainty was high after President Donald Trump’s swift rejection of Iran’s response to a US peace proposal fuelled concerns that the 10-week-old conflict would drag on and continue to paralyse shipping through the Strait of Hormuz and keep oil prices elevated.

“The energy price is going to remain elevated for a while and it feels to me the markets are just taking (it) a little bit for granted,” said Jeremy Batstone-Carr, European strategist at Raymond James.

“The real story is not actually in the crude price, but in the price of diesel and in the price of jet fuel. So you’re starting to see crack spreads widen.”

Travel and leisure stocks are among the worst performers this year, down more than 7 percent.

The war has shuttered the Strait of Hormuz, a vital waterway for a fifth of global energy flows, with soaring oil prices adding to concerns over the conflict’s impact on inflation and growth.