European stock markets opened lower on Monday morning following poor sentiment in Asian markets, with Japan’s Nikkei 225 index dropping over 5percent and Taiwan's main index declining by 4.4percent.
Other Asian markets also declined after oil prices surged to almost $120 a barrel, creating uncertainty for economies that rely heavily on imported crude and gas from the area.
In Europe, London's FTSE 100 fell by 1.6percent, whereas Frankfurt's DAX, Paris’s CAC 40, and Milan’s FTSE MIB each declined by over 2.4percent, as of 09:30 CET. The IBEX 35 in Madrid dropped close to 2.7percent, while the Stoxx 600 across Europe decreased by approximately 2percent.
As increasing oil and gas prices pose a risk to Europe's economic forecast this year, trading sentiment on Monday was additionally affected by disappointing data from Germany.
German manufacturing output and orders from factories both decreased at the beginning of the year. Output fell by 0.5percent in January after a revised 1percent drop the month before, the statistics office reported on Monday.
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At the same time, investor expectations are growing that the European Central Bank might increase benchmark interest rates this year, as escalating energy prices heighten concerns that inflation could spike.
The turmoil in the stock market arose as oil prices drew the attention of investors.
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Oil prices surged sharply as both factions in the Iran conflict targeted new locations over the weekend, including non-military facilities. The conflict, entering its second week, concerns areas essential for oil and gas production and transport from the Persian Gulf.
Prices eased after the reports indicated that certain members of the Group of Seven (G7) were contemplating the release of strategic oil reserves to alleviate market pressures. The unverified report referenced anonymous sources knowledgeable about the talks.
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Oil prices surged to nearly $120 per barrel before retreating on Monday as the conflict escalated, jeopardizing production and shipping in the Middle East and unsettling global financial markets.
The cost of a barrel of Brent crude, the global standard, soared to $119.50 in the morning but subsequently traded near $107.80.