European shares declined on Monday, as hopes for peace in the Middle East ebbed with tensions reigniting after Washington seized an Iranian cargo ship that tried to run its blockade and Tehran vowed to retaliate.
Investors have grown increasingly jittery as the US-Iran ceasefire, set to expire Tuesday, appears fragile.
Iran rejected fresh peace talks with the US just hours after President Donald Trump said he would dispatch envoys to Pakistan while threatening new strikes unless Tehran accepts his terms.
The pan-European STOXX 600 index was down 0.8% to 621.52 points as of 0717 GMT.
Major regional markets also fell, with France's CAC and Germany's DAX down 0.9% and 1%, respectively.
The uncertainty marks a sharp reversal from Friday's optimism, when the STOXX 600 jumped more than 1% and secured its fourth consecutive weekly gain after Iran declared the Strait of Hormuz open.
Energy shares gained 1.9% as crude prices surged., while utilities and telecommunication stocks rose 0.7% and 0.2%, respectively.
Travel and leisure sector led the declines, bearing, down 2%. Banks and automobile stocks dropped 1.8% each.
Among other movers, cash logistics company Loomis was top loser on the European benchmark index after Goldman Sachs downgraded the stock to "neutral" from "buy".
The setback in the Middle East conflict comes despite tentative signs of normalization at the Strait of Hormuz.
Although Iran has reimposed a closure of the critical waterway, Kpler data revealed more than 20 vessels carrying oil, metals, gas, and fertilizer passed through on Saturday - the busiest traffic day since March 1.
Elevated oil prices continue to weigh heavily on energy-dependent European economies, keeping investors cautious.
The strait is a conduit for one-fifth of global energy shipments. Brent crude futures advanced 5.3% to $95.19 a barrel after tumbling 9% on Friday.
