European shares muted as markets weigh US-Iran deadlock

By Twesha Dikshit and Avinash P

European shares ended Monday's session flat, constrained by a drop in luxury stocks, while stalled U.S.-Iran peace negotiations drove oil prices higher and also kept investors cautious.

The pan-European STOXX 600 closed little changed at 612.79 points. Regional indexes moved in different directions, with Italian stocks edging 0.8% higher, while France's CAC 40 slipped 0.7%.

Luxury stocks led declines among sectors, falling 3.4% and were also the worst performing on the STOXX 600 this year. LVMH lost more than 4.4%, while Hermes and Burberry fell more than 3.3% each.

Berenberg analysts said that the conflict in the Middle East masked the reality that underlying demand globally was still weak, making the sector's outlook fragile.

Global uncertainty was high after President Donald Trump's swift rejection of Iran's response to a U.S. peace proposal fuelled concerns that the 10-week-old conflict would drag on and continue to paralyse shipping through the Strait of Hormuz and keep oil prices elevated.

"The energy price is going to remain elevated for a while and it feels to me the markets are just taking (it) a little bit for granted," said Jeremy Batstone-Carr, European strategist at Raymond James.

"The real story is not actually in the crude price, but in the price of diesel and in the price of jet fuel. So you're starting to see crack spreads widen."

Travel and leisure stocks are among the worst performers this year, down more than 7%.

The war has shuttered the Strait of Hormuz, a vital waterway for a fifth of global energy flows, with soaring oil prices adding to concerns over the conflict's impact on inflation and growth.

Energy-dependent Europe remains vulnerable, with markets still trading about 4% below pre-war levels and lagging global peers that have rebounded on artificial intelligence-driven optimism.

Martin Kocher, a governing council member of the European Central Bank, warned that the ECB would need to adjust interest rates soon if the inflationary outlook did not significantly improve.

Money markets expect two or more rate hikes from the ECB this year, with the first one expected as early as June.

Offsetting losses was a 2.6% jump in miners tracking higher precious metal prices.

Among other movers, Delivery Hero jumped more than 18% after Dutch technology investor Prosus sold a 5% stake in the German food-delivery group to activist investor Aspex Management for roughly 335 million euros ($393 million).

Airtel Africa soared 14.5% after parent Bharti Airtel flagged plans to review its subsidiary shareholding structure.

(Reporting by Twesha Dikshit and Avinash P in Bengaluru; Editing by Sherry Jacob-Phillips and Alex Richardson)

Copyright Reuters or USA Today Network via Reuters Connect.

This story was originally published May 11, 2026 at 12:18 PM.