Wires

UPDATE 1-European shares tumble on U.S.-Iran faceoff; oil stocks near 2-month high

Ambar Warrick

high@

* STOXX 600 eyes worst day since early December

* German stocks lead regional declines

* Euro zone Dec PMI data better than expected (Adds comments, details and updates prices)

Jan 6 (Reuters) - European shares extended losses on Monday as tensions following the killing of a top Iranian general by the United States kept buying restricted to safe havens, while energy stocks benefited from higher oil prices.

The pan-European STOXX 600 equity index was down 1.2% by 0914 GMT and was set for its worst day in a month. German stocks were the worst performers in the region, dropping about 1.9%.

Global equities lost ground on Friday following the U.S. air strike, blindsiding markets coming off a bumper fourth quarter in 2019. However, oil prices rose on fears of supply disruptions and gold prices jumped to a near seven-year high.

"Markets had started January on a positive note... No one really expected so soon in the year to have an escalation in tensions," said Simona Gambarini, economist at Capital Economics in London.

The European oil and gas stock index rose about 0.6% and was the sole gainer among its peers, touching a near two-month high.

Meanwhile, data showed that while euro zone business activity in December expanded at a better-than-expected pace, it was still close to stagnation despite an uptick in the services sector.

The euro zone chemicals stock index was the worst performing sub-index in the region, dropping nearly 2%. German polymer maker Covestro AG led the declines on the index on reports of negative comments on the stock from brokers.

Covestro was also one of the worst performers on the STOXX 600 index.

UK bluechips fell about 1%, although oil majors BP and Royal Dutch Shell added more than 1% each. (Reporting by Ambar Warrick in Bengaluru Editing by Arun Koyyur)