The downward trend was exacerbated by U.S. employment data that surprised to the upside, leading investors to price in a rate hike this year.
On the geopolitical front, Israel stated it had struck military targets in western and central Iran, despite media reports that U.S. President Donald Trump had asked his Israeli counterpart, Benjamin Netanyahu, to refrain from launching new offensives.
Trump has pressured Israel to cease its attacks in Lebanon to allow room for a deal to end the war with Iran.
Adding to the tension were statements from Iran's ambassador in Moscow, who claimed that the Strait of Hormuz will be reopened, but under new conditions to be established by Iran and Oman, including the collection of a transit fee.
The war involving the United States, Israel, and Iran has drastically reduced the flow of crude through the strait, which accounted for a fifth of global oil supply before the conflict, driving up energy costs worldwide.
In parallel, Friday's higher-than-expected U.S. employment figures have led the market to increase bets on interest rate hikes this year, within an inflationary environment fueled by the Persian Gulf conflict.
In the debt market, the two-year Treasury yield rose more than 11 basis points on Friday and advanced another 1.6 basis points on Monday to 4.1782%.
Furthermore, the disappointing guidance published last week by chipmaker Broadcom triggered a correction in AI-related stocks after months of strong gains, amid intermittent fears that the rally has gone too far.
In this reassessment of the long-term AI narrative, South Korea's KOSPI, the world's best-performing market so far this year with a heavy weight in semiconductors, led losses in Asia on Monday with an 8% decline.
'The trigger for the declines (in Asian equities on Monday), beyond a complicating geopolitical situation, is the deleveraging of concentrated AI positions following the robust American jobs data,' Renta 4 explained.
'The data reinforces expectations of a +25 bps hike in 2026 and increases the probability of a second hike in 2027, confirming a resilient labor market that allows for a greater focus on the price stability objective (2%, vs. May CPI this week which could rebound on Wednesday above 4%e), although Trump claims that raising rates would be a mistake and is again calling for cuts,' these analysts added in their morning report.
Looking ahead to the coming days, investor attention will be focused on the massive SpaceX IPO, with pricing expected on Thursday ahead of Friday's debut, as well as Wednesday's U.S. consumer inflation data and Thursday's European Central Bank (ECB) meeting.
Meanwhile, at 0701 GMT, the Spanish benchmark IBEX 35 was down 134.70 points, or 0.73%, at 18,210.20 points, while the FTSE Eurofirst 300 index of leading European shares retreated 0.78%.
In the banking sector, Santander lost 1.27%, BBVA fell 1.03%, Caixabank shed 0.78%, Sabadell dropped 0.76%, Bankinter was down 1.00%, and Unicaja Banco lost 1.13%.
Among large-cap non-financial stocks, Telefónica gained 0.26%, Inditex shed 0.36%, Iberdrola rose 0.48%, Cellnex fell 0.39%, and oil major Repsol climbed 1.60%.
(Reporting by Tomás Cobos; editing by Benjamín Mejías Valencia)
