BRUSSELS/FRANKFURT/PARIS (dpa-AFX) - European stocks closed weak on Monday amid fading hopes for a U.S.-Iran ceasefire after Iran reportedly said it will stop communications with the United States. Also, inflation and interest rate concerns rose following a sharp rise in oil prices.
Oil prices climbed higher after Iran's state-affiliated news outlet Tasnim said Tehran will halt peace talks with the U.S. and completely close the Strait of Hormuz in response to Israeli attacks in Lebanon.
Earlier, U.S. Central Command said it conducted 'self-defense strikes' on Iranian radar and command and control sites for drones in Iran over the weekend.
Investors also reacted to regional PMI readings, and largely stayed wary of picking up stocks at higher levels.
The pan European Stoxx 600 fell 0.76%. The U.K.'s FTSE 100 ended down by 0.68%, while Germany's DAX and France's CAC 40 closed lower by 0.4% and 0.45%, respectively. Switzerland's SMI shed 1.75%.
Among other markets in Europe, Austria, Czech Republic, Denmark, Iceland, Ireland, Poland, Portugal, Russia, Spain and Sweden ended with sharp to moderate losses.
Belgium and Finland edged down marginally, while Greece, Netherlands, Norway and Ukraine closed higher.
In the UK market, Persimmon, BAE Systems, Rolls-Royce Holdings, Babcock International, 3i Group, Barratt Redrow and Convatec Group tumbled 4%-5.4%.
Kingfisher, Endeavour Mining, Pershing Square Holdings, Diageo, Haleon, Mondi, AstraZeneca, Howden Joinery Group, British Land, IAG, Bunzl and Weir Group were among the several other notable losers.
The Sage Group surged nearly 8%. Entain gained about 5.4%, while Experian, Relx and Glencore moved up 3.5%-4%.
Energy stocks BP and Shell gained 2.7% and 2.5%, respectively, riding on oil prices. Autotrader Group, RightMove, LSEG, Pearson, Sainsbury (J), IG Group. Tesco, Halma and Rio Tinto also closed notably higher.
EasyJet soared more than 10% on takeover interest. The budget airline called a potential £3bn bid by a U.S. investment group 'highly opportunistic', adding any deal would face substantial hurdles.
In the German market, Rheinmetall fell 6.6%. Bayer, MTU Aero Engines, Qiagen, Heidelberg Materials, Symrise, Daimler Truck Holding, Fresenius, Porsche Automobil Holding and Hannover RE lost 2%-4%.
SAP surged more than 8%. Scout24 gained about 3%, while Brenntag, RWE and Siemens moved up 1%-1.5%.
In the French market, Thales, Renault, Accor, Airbus, Kering, Safran, Saint-Gobain, Stellantis and Pernod Ricard ended down 2.5%-4%. Veolia Environment, Bouygues, Sanofi, Vinci, EssilorLuxottica and Societe Generale also closed notably lower.
Dassault Systemes jumped nearly 8% and Capgemini surged 7%. Publicis Groupe, Schneider Electric, Teleperformance, TotalEnergies, ArcelorMittal and STMicroelectronics gained 1%-2.5%.
On the economic front, data from the federal statistical office Destatis showed Germany's retail sales dropped 0.3% month-on-month in April 2026, matching the pace of a downwardly revised decline in the previous month and outperforming market expectations for a 0.4% fall.
On an annual basis, retail sales slipped 0.2%, following a downwardly revised 0.2% decline in March, indicating that consumer demand remained subdued despite easing inflationary pressures.
Data from S&P Global showed Germany's S&P Global Manufacturing PMI was revised higher to 50.1 in May from a preliminary of 49.9, continuing to point to nearly stabilization in the manufacturing sector.
Meanwhile, eurozone May final Manufacturing PMI reading came in at 51.6, dropping from 52.2 in April.
Data from Nationwide Building Society showed UK house prices declined for the first time this year amid high uncertainty over the developments in the Middle East and its impact on inflation and market interest rates.
House prices dropped 0.6% month-on-month in May, in contrast to the 0.4% rise in the prior month, the data showed. This was the first monthly drop so far this year and also came in weaker than forecast of 0.1% fall.
On a yearly basis, house price growth eased notably to 1.7% from 3% in the previous month.
Data from S&P Global showed the S&P Global UK Manufacturing PMI rose to 53.9 in May, compared with initial estimates and April's 53.7, marking the strongest expansion since May 2022.
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