April 2 (Reuters) - Europe's main stock index fell on Thursday, as hopes for peace in the Middle East conflict faded after U.S. President Donald Trump vowed, opens new tab more strikes on Iran and gave no clarity regarding when the hostilities would end.
The pan-European STOXX 600 index (.STOXX), dropped 1% to 591.68 points by 0909 GMT, with all regional markets trading lower, dragged by a 1.6% drop in Germany's DAX (.GDAXI).
Volumes were also low as European markets headed into a long holiday weekend. Norway and Denmark markets are closed on account of the Maundy Thursday holiday, while all major indexes will be closed for Good Friday on April 3 and Easter Monday on April 6.
Global market sentiment was battered after Trump said, opens new tab, "We're going to hit them extremely hard over the next two to three weeks. We're going to bring them back to the Stone Ages where they belong."
European technology stocks (.SX8P), slid nearly 3% and led sectors lower, while miners (.SXPP), fell 2.3%, tracking lower precious metal prices.
Banks (.SX7P), fell 2% and were among the major weights on the index. It had logged its strongest daily performance in nearly a year on Wednesday.
Brent crude whizzed past $100 a barrel, up nearly 7%. It helped the energy sector (.SXEP), rise 1.7%.
The prospects of higher energy costs and supply disruption pressured airline stocks such as Air France (AIR.PA), and Lufthansa (LHAG.DE), which fell more than 3.7% each. The same concerns led Morgan Stanley to lower core earnings estimates for European airlines.
A delay in reopening the Strait of Hormuz, a strategic waterway for major European oil imports, will continue to pressure equities and reinforce heightened inflation and growth fears.
"For the first couple of weeks since the attacks, the market was very worried about inflation," said Marija Veitmane, head of equity research at State Street.
"Now we begin to worry about growth outcomes... and that pressures equity multiples."
The STOXX 600 is set for its first weekly gain since the war began on February 28, as investors reacted to Trump's remarks earlier in the week that Washington would wind up its hostilities with Iran imminently.
This week's whipsaw in markets also reflects the volatility investors have had to navigate for more than a month. The STOXX volatility index (.V2TX), added 2.3 points to 29.2 and was near a one-month high.
Europe's benchmark bond yields rose on Thursday, snapping a three-day fall, while investors raised bets for at least three 25-basis-point interest rate hikes by the end of this year, according to LSEG-compiled data. Markets had been pricing in no change to monetary policy by the European Central Bank before the war.
Among other movers, Stellantis (STLAM.MI), added 2.6% after Bloomberg News reported that the carmaker was discussing options for building electric vehicles in Canada with Chinese partner Zhejiang Leapmotor Technology .
Reporting by Avinash P and Johann M Cherian in Bengaluru; Editing by Nivedita Bhattacharjee, Mrigank Dhaniwala and Harikrishnan Nair
