European stocks fall on Israeli-Iranian tensions, heading for a negative week.

European stocks declined on Friday, with the Stoxx 600 index falling 0.9% to 544.67 points, marking its fifth consecutive negative session. The travel and leisure sector was the hardest hit, with ICAG, Lufthansa, and EasyJet down 4.7%, 3.8%, and 3.9%, respectively. Energy stocks rose 1.2%, with Shell and BP gaining 1.5% and 2.8%, respectively. The market volatility index rose 2.66 points to 22.02, its highest level since May 26.

European stocks experienced a significant drop on Friday, with the pan-European Stoxx 600 index falling 0.9% to 544.67 points, marking its fifth consecutive negative session [1]. The travel and leisure sector was particularly hard hit, with shares of British Airways owner ICAG, Lufthansa, and EasyJet down 4.7%, 3.8%, and 3.9% respectively [1]. Meanwhile, energy stocks rose 1.2%, with Shell and BP gaining 1.5% and 2.8% respectively [1].

The market volatility index rose 2.66 points to 22.02, reaching its highest level since May 26, indicating heightened investor caution [1]. The decline in European shares comes amid escalating geopolitical tensions, including Israel's attacks on Iran and the ongoing trade negotiations between the United States and China [2, 3]. These events have led to a broader sell-off in risk assets, with investors flocking to safe haven assets [1].

The travel and leisure sector's downturn can be attributed to the heightened geopolitical risks and the impact of soaring oil prices, which have weighed most heavily on airlines [1]. The energy sector's rise, on the other hand, can be linked to the increased demand for oil and the potential for higher energy prices due to the Middle East tensions [1]. Additionally, defense stocks also saw gains, with France's Dassault Aviation and Italy's Leonardo up 1.3% and 2.3% respectively, reflecting investors' concerns about the geopolitical situation [1].

The market's cautious sentiment is further underscored by the recent lack of clarity surrounding global trade policy and the potential for an EU-US deal before Trump's July 8 deadline [2]. The U.S. President's announcement of extending trade talk deadlines and the movement of U.S. personnel out of the Middle East have added to the market's unease [2, 3].

Overall, the European market's performance on Friday reflects the broader global risks and uncertainties, with investors remaining cautious amidst the ongoing geopolitical tensions and trade negotiations [1, 2, 3].

References:
[1] https://m.economictimes.com/markets/stocks/news/european-shares-drop-amid-caution-after-israels-attacks-on-iran/articleshow/121822830.cms
[2] https://www.marketscreener.com/quote/index/STOXX-EUROPE-600-INDEX-EU-7477/news/European-shares-drop-as-trade-optimism-wanes-geopolitical-tensions-rise-50222307/
[3] https://www.marketscreener.com/quote/index/STOXX-EUROPE-600-INDEX-EU-7477/news/European-shares-tumble-as-trade-geopolitical-tensions-mount-50222307/