LONDON — European stocks finished Monday's session higher as investors digested the latest impasse in peace negotiations between the U.S. and Iran.
The pan-European Stoxx 600 was up 0.1% by the end of dealmaking. Regional bourses in London, Frankfurt and Milan closed in positive territory, but in Paris the CAC 40 closed down almost 0.8%. Regional sectors ended the day broadly mixed.
European defense names retreated after Middle East peace talks, which lifted markets last week, appeared to have stalled.
German defense giant Rheinmetall ended the session 2.7% lower, while tank parts maker Renk closed down 3.8%. Leonardo, the Italian defense mainstay, dropped 3%, while Germany's Hensoldt tumbled 3%. U.K. aerospace staple Babcock International was 1.7% lower at the close of trade.
The reversal came as U.S. President Donald Trump declared Iran's counterproposal to end the war in the Middle East as "unacceptable".
Negotiators have received Iran's response to U.S. proposals for peace talks, with the Tehran regime demanding an end to the war on all fronts and the lifting of sanctions on the country, Iran's semi-official Tasnim news agency said, citing an informed source.
But Trump said in a Truth Social post Sunday night that he did not like Iran's response, adding that it was "TOTALLY UNACCEPTABLE!"
Meanwhile, Israeli Prime Minister Benjamin Netanyahu said Sunday that the war with Iran was "not over," as the U.S. and Israel still aim to curb Tehran's nuclear ambitions.
The slide in defense names also comes after Russia's president Vladimir Putin said a conclusion to the four-year war in Ukraine could be in sight.
Speaking after a dramatically scaled-back annual Victory Day military parade in Moscow, Putin said the conflict, which he referred to as a "special military operation", is "coming to an end." However, Ukraine's military reported Russian drone strikes over the weekend, in an apparent violation of a two-day ceasefire agreed earlier between the two sides.
Oil prices rose on Monday, with Brent crude, the global benchmark, up 2.4% to $103.77 a barrel. U.S. West Texas Intermediate futures rose 2.3% to $97.57 per barrel.
On Wall Street, the S&P 500 rose 0.3%, as the Nasdaq Composite advanced 0.3%, with both indexes touching fresh highs. The Dow Jones Industrial Average was flat.
Trump's trip to China later this week is also in focus, with the president set for talks with Chinese premier Xi Jinping on a wide range of matters, from trade to rare earth export controls, as well as global geopolitics.
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There are no major earnings or data releases in Europe on Monday.
— CNBC's Anniek Bao contributed to this market report.