European stocks end lower amid Middle East tensions

European stocks ended Monday with losses amid concerns that the conflict in the Middle East could escalate following US and Israeli attacks on Iran and subsequent Iranian retaliation.

The pan-European Stoxx Europe 600 index fell 1.61%, or 10.22 points, to close at 623.63.

Germany's DAX 40 was down 2.56% at 24,638, while the UK's FTSE 100 index lost 1.20% to 10,780.11.

France's CAC 40 index dropped 2.17% to 8,394.32 points and Italy's FTSE MIB 30 fell 1.97% to 46,280.40.

Spain's IBEX 35 also decreased 2.64% to end the day at 17,875.80.

European markets reacted negatively to the joint US-Israeli attacks on Iran that began on Saturday, which reportedly killed several high-ranking Iranian officials, including Supreme Leader Ayatollah Ali Khamenei.

Iran has responded with drone and missile strikes targeting Israel and regional locations hosting US military assets, heightening tensions across the Middle East.

European gas prices ended the day up 35.5% amid mounting concerns over global energy supplies.

Shares of defense companies advanced, with the UK's BAE Systems gaining 6.1%, Italy's Leonardo rising 2.5% and Germany's Renk climbing 3.3%.

Energy stocks also posted strong gains. Norway-based Var Energi rose 6%, while Equinor jumped 8% on expectations of tighter energy supplies. In contrast, travel and tourism-related companies declined amid heightened regional uncertainty.

The European Union Aviation Safety Agency (EASA) extended its advisory urging airlines to avoid airspace over the Middle East and the Gulf region until March 6.

Meanwhile, several maritime insurers said they had withdrawn war risk coverage for vessels operating in the area following the joint US-Israeli strikes, underscoring growing security risks for global shipping.

Separately, the EU and Switzerland signed a comprehensive agreement package aimed at deepening bilateral ties.

In economic data, the euro area manufacturing Purchasing Managers' Index (PMI) climbed to 50.8 in February, marking its highest level in 44 months and signaling renewed expansion in the sector.

The euro/dollar parity was at 1.1702, down 0.95% as of 1750GMT.