European Stocks Slip on Oil Price Spike and ECB Rate Hopes

European stocks declined on Monday as rising oil prices fueled inflation concerns and bolstered expectations that the European Central Bank may need to continue raising interest rates beyond its upcoming meeting. The pan-European STOXX 600 index dropped by 0.1% to 649.98 points by 0850 GMT, while Switzerland's main index fell 1.2%. Novartis, a heavyweight in the sector, slid 3.4% after its cholesterol drug failed in a closely watched study.

The energy sector saw some gains with a 1.2% increase as Brent crude futures rose by more than $1 per barrel due to heightened concerns of supply disruption following tit-for-tat strikes between the US and Iran. The European Central Bank is widely expected to raise interest rates by 25 basis points on Thursday, while investors are pricing in another quarter-point increase in December.

The victory of Germany's far-right AfD party in state elections has raised concerns about volatility ahead of the French presidential election, according to Neil Wilson, UK investor strategist at Saxo Markets. Investor morale in the euro zone rose to its highest reading in over four years in September, a survey showed on Monday.