European shares sank on Monday, with oil prices rising and bonds extending their sell-off, as inflation worries continued with no signs of a deal between the US and Iran.

The pan-European STOXX 600 fell 0.7% to 602.52 points, as of 0703 GMT, after ending the previous week lower. Germany’s DAX and France’s CAC 40 were off 0.5% and 1%, respectively.

A drone strike caused a fire at a nuclear power plant in the UAE, while Saudi Arabia reported intercepting three drones, with US President Donald Trump warning that Iran must act “fast”.

The US-Israel war on Iran is in its third month, with Tehran and Washington unable to come to a resolution as the vital Strait of Hormuz remains shuttered.

Rising energy prices have fanned inflation fears and led to expectations of rate hikes from global central banks. European equities, with the region’s dependence on oil imports, have been unable to catch up to pre-war levels while global indexes have rebounded on AI-led optimism.

In early trading, AstraZeneca dipped 0.8%.

The drugmaker’s hypertension pill was approved in the US Sonova gained 4.1% after the world’s biggest hearing aid maker forecast higher sales and earnings for the 2026/27 financial year.