April 20 (Reuters) - Futures tracking Europe's main stock indexes fell more than 1% on Monday, as hopes for peace in the Middle East ebbed with tensions reigniting after Washington seized an Iranian cargo ship that tried to run its blockade and Tehran vowed to retaliate.
Futures tracking the STOXX 600 index slid nearly 1.5% by 0645 GMT, with contracts tracking Germany's DAX and France's CAC 40 index down 1.5% and 1.3%, respectively.
The setback comes despite tentative signs of normalization at the
Strait of Hormuz.
Although Iran has reimposed a closure of the critical waterway, Kpler data revealed more than 20 vessels carrying oil, metals, gas, and fertilizer passed through on Saturday - the busiest traffic day since March 1.
Still, markets have grown increasingly jittery as the U.S.-Iran ceasefire, set to expire Tuesday, appears fragile.
Iran rejected fresh peace talks with the U.S., according to its state news agency, just hours after President Donald Trump announced he would dispatch envoys to Pakistan while threatening new strikes unless Tehran accepts his terms.
The uncertainty marks a sharp reversal from Friday's optimism, when the STOXX 600 jumped more than 1% and secured its fourth consecutive weekly gain after Iran declared the Strait of Hormuz open.
The strait is a conduit for one-fifth of global energy shipments.
Elevated oil prices continue to weigh heavily on energy-dependent European economies, keeping investors cautious.
Oil majors are expected to post strong gains as crude prices surged. [O/R]
Travel and industrial sectors might face steep declines, bearing the brunt of higher energy costs.
(Reporting by Ragini Mathur in Bengaluru; Editing by Mrigank Dhaniwala)
