UPDATE 2-European shares drop as Washington and Tehran trade threats

* STOXX 600 slips for the second straight session
* Energy stocks outshine on oil boost
* German, British stocks lead regional declines

(Updates to close)
By Medha Singh
Jan 6 (Reuters) - European shares slipped on Monday as
investors continued to trim risky bets amid escalating tensions
between the United States and Iran, but shares of jeweller
Pandora soared after it said it would meet 2019 sales targets.
Iran vowed to avenge the killing of a top general by the
United States, while U.S. President Donald Trump warned that
Washington would strike back if Tehran retaliated. The pan-European STOXX 600 .STOXX index dropped 0.4%, well
off its session lows but down for the second straight day.
Bourses in Germany .GDAXI and Britain .FTSE suffered the
steepest losses in the region.
"The likeliness is that this will not lead to war, and thus
it is likely that the current market moves will be short-term in
nature," said Joshua Mahony, senior market analyst at IG.
"However, markets will be highly responsive to any
commentary and threats which are likely to maintain the current
gains for havens such as gold and crude."
The European oil and gas stock index .SXEP closed at its
highest level in nearly three months on the oil price rises.
O/R
All but two of the European sub-sectors were lower.
The prospect of higher fuel costs hit airline stocks.
British Airways' owner ICAG.L , Easyjet EZJ.L , Lufthansa
LHAG.DE and Ryanair RYA.I all pulled the travel and leisure
.SXTP sector 1.2% lower.
German polymer maker Covestro AG 1COV.DE slipped nearly 5%
on reports of negative comments on the stock from brokers. Its
shares pulled the chemicals index .SX4P down 0.9%.
Pandora PNDORA.CO jumped 12% after its preliminary results
showed it would meet its 2019 sales and profit margin forecast,
a sign that attempts to turn around the struggling jeweller
could be starting to pay off. The food and beverage .SX3P index eked out a gain while
telecoms .SXKP and utilities .SX6P outperformed the wider
markets, indicating a preference for defensive plays.