The pan-European STOXX 600 index was down 0.7% at 543.26 points by 8.57am. It snapped a five-session losing streak yesterday.

US President Donald Trump urged Iranians to evacuate Tehran and departed early from the Group of Seven summit in Canada, but clarified that it had “nothing to do” with working on a ceasefire.

Markets were concerned that the heightened tensions between the long-standing rivals could spill over into the oil-rich Middle East, though no disruptions have been reported yet.

Oil prices ticked higher, helping boost energy shares by 1%.

“The bigger question is what will happen on the Strait (of Hormuz) and if there is a closure, it will have implications for oil prices,” said Jukka Jarvela, head of listed equities at Finland’s Mandatum Asset Management.

“If they (oil prices) stay at the high level, it will accelerate the inflation again, which would be negative for the equities,” Jarvela said.

Most major sectors in the STOXX 600 were in red, with heavyweight banks down 1.6%, leading declines.

The bourses in Germany and Spain declined 1.1% and 1.5%, respectively.

The Middle East tensions add another cause of worry for investors, who were already grappling with Trump’s tariff policy and its impact on global economic growth.

However, the European market has benefited from a rotation out of US assets this year.

Jarvela sees the trend continuing in the long-term given structural and policy changes in the bloc.

Amadeus shares fell 3.7%, among the biggest losers on the index, after Goldman Sachs sold shares of the Spanish travel technology company.

Ireland sold its remaining shares in AIB Group sending its shares down 2.2%.

Legal and General was down 1.3% after the insurer forecast 2025 core operating earnings per share in line with its three-year targets.

On the day, the Swedish central bank’s monetary policy decision will be watched.

Focus this week also remains on interest rate decisions in the UK and the US.