Middle East Clash Lifts Oil; European Stocks Slip, easyJet Surges

European stocks opened lower on Monday after the United States and Iran exchanged fire over the weekend, sending crude oil prices up more than 2%. The pan-European STOXX 600 was down 0.1% at 0709 GMT as investors tracked heightened regional tensions, including clashes involving Israel and Hezbollah in Lebanon.

Brent crude and U.S. crude both rose over 2% in early trading. The energy sector outperformed, gaining about 1.1% as higher oil prices improved revenue prospects for producers. Most other sectors traded lower. Airline shares were modestly weaker, with Lufthansa and Air France trading marginally down.

easyJet shares jumped 11% after the airline stated it had not received a takeover proposal from U.S. investment firm Castlelake and that it would consider any formal offer. Castlelake indicated it is in the early stages of evaluating a possible bid, which intensified market speculation despite the absence of a formal approach.

Universal Music Group fell about 1.5% after rejecting an unsolicited takeover proposal from Pershing Square Capital Management, the investment firm led by Bill Ackman. The rejection made Universal Music one of the larger decliners in early European trading.

During the corporate reporting season, many companies posted earnings and forward guidance that investors viewed as stronger than expected. Reflecting those developments, Goldman Sachs raised its 12-month target for the STOXX 600 to 660.

Market participants monitored rising oil prices, military tensions in the Middle East and renewed merger-and-acquisition activity as factors likely to influence sentiment and trading in the near term.