European shares drop as escalating US-Iran tensions weigh on sentiment

European shares slipped on Thursday as escalating tensions in the Middle East clouded the outlook for an imminent deal to open the Strait of Hormuz and added to concerns about the health of the global economy.

The pan-European STOXX 600 .STOXX dropped 0.4% to 625.83, as of 0806 GMT, with all major regional bourses also lower.

Prices of crude oil, a key resource for Energy-deficient Europe, shot up over 2.5% to $97 a barrel as hostilities escalated between Iran and the U.S., while Kuwait said that its air defences were intercepting hostile missile and drone threats, similar to the attacks seen during the heat of the conflict in March.

Energy price-sensitive airlines such as Air France AIRF.PA and Lufthansa LHAG.DE dipped about 1% each.

Most sectors were in the red, while gains in technology stocks .SX8P helped offset declines. French semiconductor materials supplier Soitec SOIT.PA shot up 16% after reporting annual sales above market expectations.

Peers such as Infineon IFXGn.DE and ST Microelectronics STMPA.PA added more than 2% each.

Among others, BT BT.L lost 2.5% in choppy trading after a report said the British government will oppose any attempt from Indian billionaire Sunil Bharti Mittal to increase his stake in the telecoms group, citing the need to maintain sovereign control over "critical national infrastructure".

-Reporting by Johann M Cherian in Bengaluru; Editing by Rashmi Aich/Reuters