Europe close: Stocks knocked lower by geopolitical angst, inflation worries

European shares finished sharply lower on Monday amid fears Russia could invade Ukraine at any moment, with travel stocks slumping and oil prices rising, and nagging concerns around inflationary pressures.

That was despite Moscow announcing mid-morning that it was ready to continue down the diplomatic route.

"As yet the situation in eastern Europe remains tense but peaceful, but markets are continuing to fret that tensions may spill over into a more serious crisis. As a result the atmosphere remains in risk-off territory, with heavy losses for both European and US markets," said IG chief market analyst Chris Beauchamp.

"This builds on the decidedly bearish end to last week, and while efforts continue to resolve the situation no actual solution is yet in sight."

The pan-European Stoxx 600 index was down 1.83% to 460.96, with Germany's DAX off by 2.02% at 15,113.97, while France's CAC 40 lost 2.27% to 6,853.20.

Oil prices hit their highest levels in more than seven years on worries that any invasion of Ukraine could trigger US and European sanctions on Russia and disrupt energy exports. Brent crude was last up more than $1 to above $95 a barrel.

Western leaders were desperate to avoid a war, with German Chancellor Olaf Scholz travelling to the Ukrainian capital Kyiv on Monday and then to Moscow on Tuesday for talks with Russia's Vladimir Putin.

In equity news, travel stocks were all lower on Russia/Ukraine tensions, with Wizz Air, which focuses on eastern European destinations down more than 6%, British-Airways owner IAG, cruise line operator Carnival and Germany's Lufthansa all marked down.

Evraz, which has steelmaking assets in Russia, saw its shares plummet by almost a third.

Shares in Swiss chemical company Clariant fell 16% after it postponed its annual results as investigators probe whistleblowers allegations that some staff manipulated accounts in 2020 and 2021 to help meet financial targets.

Commerzbank reversed early losses to trade up by 2% after Germany's finance minister said the government would not keep its stake in the lender in the long run.