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Europe closes mostly higher, oil tanks over 4%

European equities finished Monday in mixed trading despite a sharp drop in oil prices weighing on investor sentiment.

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The pan-European Stoxx 600 index pared sharp gains to close up 0.5 percent provisionally, with most sectors ending in positive territory, yet, the oil and gas sector tanked 2.8 percent.

France's CAC and Germany's DAX finished trade up 0.9 and 1.2 percent respectively, however, the London FTSE closed down 0.2 percent.

Oil prices tumble; Electrolux tanks

Oil prices were in focus for European markets on Monday as investors digested the latest news coming from last week's meeting of the Organization of Petroleum-Exporting Countries (OPEC) in Vienna on Friday. There, the 12-member oil producing group, whose de facto leader is Saudi Arabia, decided to keep its policy unchanged in order to view future market fluctuations, despite a global supply glut. Consequently, U.S. markets traded lower on Monday.

Brent crude fell to more than 6½-year low during trade, down over 4 percent at $41.14 by Europe's close, while its U.S. counterpart, WTI crude, slipped further below $40, down around 5 percent briefly, last standing at $38 a barrel. The U.S. dollar was up against a basket of currencies, including the ruble, as oil weighed on the Russian currency.

Individual oil stocks nosedived over supply glut concerns, with Tullow Oil and Seadrill both closing down over 8 percent, while Petrofac, Royal Dutch Shell and Subsea 7 all ended sharply lower.

Basic Resources also came under pressure, off over 1 percent, with miners weighing on the FTSE. Antofagasta and BHP Billiton were both off 2.8 percent, while Luxembourg-based steel firm, Arcelormittal tumbled 3.7 percent.

Shares of Electrolux plummeted 13.4 percent—making it the worst performer on the index—after it said its deal to buy General Electric's appliance business had fallen through after GE terminated the $3.3 billion agreement.

Germany's cartel office approved property company Vonovia's planned 14 billion-euro ($15 billion) hostile bid for smaller firm, Deutsche Wohnen, the watchdog announced Monday, according to Reuters. Vonovia shares finished up 3.4 percent, while Deutsche Wohnen jumped 3.7 percent.

Airbus shares took off, closing up near 3 percent, after the aircraft manufacturer announced that it had booked over 1,000 jetliner orders between January and November of 2015. This sent other firms in the Industrials sector up, including Rolls-Royce, up 2.7 percent.

On Sunday, U.S. President Barack Obama outlined his administration's intensified efforts to combat "a new phase" of terrorist threats in the U.S. in a rare Oval Office address. Obama was trying to boost confidence in his national security strategy after last week's deadly attack in San Bernardino, California.

Read MoreHere's what Obama could have done better

In Europe, there were big gains for the right in local elections in France this weekend. The far-right National Front (FN) won in six out of 13 regions in what is seen as a reaction to the Paris attacks. Marine Le Pen, President of the National Front said after the vote: "The people expressed themselves. And with the people, France raises its head."

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