European Markets Plummet Amid Escalating U.S.-Iran Conflict

European stocks suffered their largest single-day drop in three months as a geopolitical crisis involving the U.S. and Iran escalated. Despite reassurances from the Pentagon, market volatility surged, with sectors like banks, industrials, and travel impacted. However, the energy sector became a rare outperformer.

On Monday, European stocks experienced their steepest single-day decline in three months, amid a widespread sell-off in risk assets. The downturn followed escalating tensions as the U.S.-Iran conflict intensified over the weekend, leaving investors concerned about regional stability.

The pan-European STOXX 600 index fell by 1.7%, its lowest close in over two weeks, as news of Ayatollah Ali Khamenei's death in a bombing prompted Iran to retaliate against U.S. bases. These developments overshadowed Friday's record highs and spiked the STOXX volatility index to its highest since mid-November.

Bank stocks, including heavyweights like HSBC, led the losses with a 3.2% drop, while the energy sector surged as oil prices spiked due to disruptions in the Strait of Hormuz. Meanwhile, travel and leisure stocks suffered as airlines dealt with airspace closures and suspended routes in the Middle East.

(With inputs from agencies.)