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European Stocks Rise as Middle East Peace Talks Stall, Defense Sector Retreats

European equities closed higher Monday despite faltering negotiations in the Middle East. Markets in London, Frankfurt, and Milan gained ground, though Paris bucked the trend with the CAC 40 declining nearly 0.5%. Defense contractors bore the brunt of selling pressure after optimism about regional peace prospects dimmed. Rheinmetall fell 2.7%, while Renk dropped 3%. Leonardo and Hensoldt both declined 3%, with Babcock International down 1%. The sector selloff followed President Trump's rejection of Iran's counterproposal, which he labeled unacceptable. Iran demanded an end to the war on all fronts and lifting of sanctions. Israeli Prime Minister Benjamin Netanyahu signaled continued resolve to curb Tehran's nuclear ambitions. Ukraine's military reported Russian drone strikes over the weekend, undercutting a two-day ceasefire agreed earlier between the two sides. Oil markets responded positively, with Brent crude rising 2.3% to fresh highs.