European shares dip as renewed Middle East tensions cloud peace prospects

European shares opened lower on Monday as heightened tensions in the Middle East tempered hopes for an imminent end to the conflict, while investors also focused on dealmaking news involving the UK’s easyJet and Amsterdam-listed Universal Music Group.

The pan-European STOXX 600 index edged 0.1% lower by 0709 GMT, after having a subdued close to the previous week.

Prices of crude oil, a key resource for energy-deficient Europe, climbed more than 2% as the US and Iran said they traded fire through the weekend, even as negotiations continued to resolve the three-month-old war.

Geopolitical tensions were also high between Israel and Lebanon’s Hezbollah.

Most sectors traded in the red, with airlines Lufthansa and Air France marginally lower, while energy stocks gained 1.1%.

Despite the uncertainty, analysts said corporate earnings and forecasts have held up better than expected this reporting season, with Goldman Sachs raising its 12-month target for the benchmark STOXX to 660.

In M&A news, easyJet jumped 11% after the British budget airline said it had not received any takeover interest from US-based investment firm Castlelake, though it would consider any proposal if made.

The investment firm said it was in the early stages of considering a possible offer for the carrier.

Shares of Universal Music Group slipped 1.5% after the company rejected an unsolicited takeover proposal from Bill Ackman’s Pershing Square Capital Management.