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May 18 (Reuters) - European shares sank on Monday, with oil prices rising and bonds extending their sell-off, as inflation worries continued with no signs of a deal between the U.S. and Iran.

The pan-European STOXX 600 .STOXX fell 0.7% to 602.52 points, as of 0703 GMT, after ending the previous week lower. Germany's DAX .GDAXI and France's CAC 40 .FCHI were off 0.5% and 1%, respectively.

A drone strike caused a fire at a nuclear power plant in the UAE, while Saudi Arabia reported intercepting three drones, with U.S. President Donald Trump warning that Iran must act "fast".

The U.S.-Israel war on Iran is in its third month, with Tehran and Washington unable to come to a resolution as the vital Strait of Hormuz remains shuttered. Rising energy prices have fanned inflation fears and led to expectations of rate hikes from global central banks.

European equities, with the region's dependence on oil imports, have been unable to catch up to pre-war levels while global indexes have rebounded on AI-led optimism.

In early trading, AstraZeneca AZN.L dipped 0.8%. The drugmaker's hypertension pill was approved in the U.S.

Sonova SOON.S gained 4.1% after the world's biggest hearing aid maker forecast higher sales and earnings for the 2026/27 financial year.