Europe open: Stocks rattled by Israel conflict as oil prices surge
Stocks across Europe mostly declined on Monday as oil prices surged on geopolitical uncertainty following the weekend attack on Israel.
The Europe Stoxx 600 index was down 0.2% early on, with the Dax falling 0.7%, the Cac 40, FTSE MIB and Ibex 35 each losing 0.6% and the FTSE 100 rising 0.2%.
Crude prices, which dropped sharply last week, were rebounding strongly over the weekend after a surprise attack by Hamas on Saturday morning, killing more than 700 people, including 260 at a music festival. Israel swiftly retaliated launching air strikes in Gaza, which are said to have killed more than 500.
Brent touched a high of nearly $89 a barrel before pulling back to $86.56 on Monday morning, still up 2.3% on the day.
"As it nearly always does, an escalation of tensions in the region has helped push up oil prices. This is inevitable given how much of the world’s crude reserves and production are centred there," said AJ Bell investment director Russ Mould.
Israeli authorities have alleged that Iran may have been involved in the attack, which some are predicting could lead to sanctions by the US on Iran's crude exports, further propping up prices.
Meanwhile, analysts at Rabobank said the event has the potential to make the task of central bankers even more challenging. "A sustained upward pressure in energy prices will make the task faced by central bankers even more difficult. Specifically they will have to weigh up (i) the downward impact on economic growth of higher oil prices and (ii) the risk that an energy driven increase in headline inflation will pose to consumer inflation expectations and the wage negotiation process," they said.
Monday is set to be a relatively quiet day in terms of economic data, with no major indicators due from Europe or the US, with the latter quiet for Columbus Day – though Wall Street will remain open.
Oil stocks up, airlines down
Oil and gas stocks rose strongly as crude prices soared. However, Tel Aviv and London-listed Energean was understandably bucking the trend, given it is developing a substantial gas field offshore Israel.
The Stoxx Europe 600 Oil & Gas Index was up nearly 2% early on, with Shell, BP and TotalEnergies putting in decent gains.
Airlines were under pressure from both elevated oil prices and travel uncertainty, with Deutsche Lufthansa, IAG, Air France-KLM and Ryanair suffering heavy losses.