The pan-European Stoxx 600 had turned positive, closing 0.6% higher, Germany’s DAX gained 1%, France’s CAC 40 added 0.8%

European stocks reversed early losses to trade mostly higher on Monday.

Meanwhile, Iran’s Fars news agency, citing a source, denied any form of communication with Washington, direct or indirect, contradicting President Trump’s recent claim of “productive” talks with Tehran.

The agency also reported that Trump walked back on plans to strike Iranian power plants after Iran warned of retaliatory strikes on energy infrastructure across West Asia.

The pan-European Stoxx 600 had turned positive, closing 0.6% higher, Germany’s DAX gained 1%, France’s CAC 40 added 0.8%, and Britain’s FTSE 100 edged 0.2% lower.

In the Middle East, vessels have been effectively blocked from traversing the Hormuz strait, while container shipping companies have struggled to secure insurance for sailings.

Iran had threatened to attack Israel’s power plants and facilities supplying U.S. bases across the Gulf region if Washington attacked its energy network.

Oil prices tumbled sharply. Brent crude futures dropped 8.5% to $97.40 a barrel.

The benchmark remains well above the almost $70 a barrel at which they were trading before the war erupted in late February.

The war has also rattled energy markets beyond oil. A key natural gas production facility in Qatar was recently struck as part of Iranian attacks on regional sites, sending European gas prices sharply higher.

Europe is a major importer of Qatari liquefied natural gas, adding to the region’s vulnerability to any prolonged disruption.

Last week, the European Central Bank warned that protracted fighting could reignite inflationary pressures, saying policymakers stand ready to adjust interest rates as necessary, fuelling some speculation over potential rate hikes in coming months.

Escalation in the war remains bad news for asset markets, said Thomas Mathews, Head of Markets, Asia Pacific, at Capital Economics.