This marks the largest decline since April 7, 2025, when panic swept through financial markets after the outbreak of a trade war triggered by U.S. tariffs announced by Donald Trump.
The attacks resulted in the death of the Supreme Leader in Tehran, while U.S. and Israeli bombings of Iran showed no signs of abating.
Iran responded with waves of missiles at various points across the region, heightening the risk of neighboring countries being drawn into the conflict, even as U.S. President Donald Trump indicated that the U.S.-Israeli assault on Iranian targets could last for weeks.
The military escalation drove up oil prices sharply and threatened to disrupt global oil flows for weeks, as well as causing turmoil for international travel.
In this context, oil companies saw buy orders on the stock market due to the appreciation of crude, and defense stocks performed better than other companies, amid expectations of increased military spending in the United States.
"The S&P 500 is at the worst possible entry point to absorb this 'shock': structural inflation due to tariffs, a paralyzed Fed, and rising oil prices. If the conflict is limited to four weeks as Trump suggests, the market may bottom out this week and rebound sharply once there is clarity," said Sergio Ávila, an IG analyst, in his morning report.
"If it escalates into a prolonged regional war with the Strait of Hormuz compromised, Bloomberg Economics warns of oil at $108, which would drive inflation higher and bury any expectations of rate cuts. That would be the scenario of lasting damage."
With the corporate earnings season now closed, investors' attention this week will also turn to a series of U.S. macroeconomic data, including the ISM manufacturing index (Monday), retail sales (Friday), and the ever-crucial jobs report (Friday).
As of 0802 GMT on Monday, Spain's benchmark IBEX 35 index was down 522.00 points, or 2.84%, to 17,838.80 points, while the FTSE Eurofirst 300 index of major European stocks fell 1.54%.
The Spanish benchmark had posted a 2.7% gain in February, marking its eighth consecutive day of increases.
In the banking sector, Santander lost 5.04%, BBVA fell 4.20%, Caixabank dropped 4.09%, Sabadell declined 4.08%, Bankinter was down 3.56%, and Unicaja Banco lost 4.44%.
Among the major non-financial stocks, Telefónica fell 2.29%, Inditex dropped 4.72%, Iberdrola was up 0.10%, Cellnex fell 1.03%, and oil company Repsol rose 7.44%.
Notable gainers included defense systems group Indra, which rose 4.2%, and oil company Repsol, which added 7%.
(Reporting by Tomás Cobos; edited by Benjamín Mejías Valencia)
