Italian shares fell sharply after violent unrest in Libya weighed on firms with heavy investment there and drove concern that oil supplies could be hit.
Over the weekend, protests at the 40-year rule of Colonel Muammar Gaddafi spread to the capital, with hundreds killed amid fears of civil war.
Italy, ex-colonial ruler and chief recipient of Libyan crude oil, bore the brunt of the market selloff, with lender UniCredit, in which the Libyan government holds a 7.5 percent stake, down 3.3 percent, Reuters reports.
“The energy problem, interests in the area and the risk of overhang of Libyan government investments in Italian companies are weighing on shares,” a Milan-based analyst said.
Also hurt by its connection to the autocratic regime of Gaddafi was Italian aerospace and defense company Finmeccanica, down 1.4 percent. Tripoli holds a 2 percent stake in the firm and has agreed a joint venture.
Italy’s FTSE MIB lost 2 percent, though it is still up nearly 12 percent so far this year, while the pan-European FTSEurofirst 300 .FTEU3 fell 0.5 percent.
Among Italian blue-chips, oil major Eni has extensive operations in the north African country and proved the biggest faller, down 4.8 percent. Eni has said it plans to invest $25 billion there.
Other Italian firms hit by the Libyan turmoil included Impregilo, down 5.3 percent, and Fiat (FIA.MI), down 2 percent.
However, the biggest decliner in Europe was Austrian oil refiner OMV down 6 percent. Libya is a major supplier of oil to the company, which said it was withdrawing expatriate staff from the country although none of its operations had been affected by the unrest.
Underpinning much of the concern for stock investors across Europe has been the effect on oil and gas supplies. Brent crude, the European benchmark grade, hit a 2-1/2 year high on Monday above $105 a barrel.
“Libya is a significant producer and exporter of good quality crude oil and threats by the tribal leader to stop production is worrisome,” said Christophe Barret, an oil analyst at Credit Agricole Corporate and Investment Bank.
Earlier, Al Jazeera television reported output had stopped at Libya’s Nafoora oilfield due to a strike, while oil majors operating in the region sought to assess operations there.