European equities were little changed on Monday as investors assessed geopolitical risks tied to Iran and gauged expectations for tighter European Central Bank policy.
The pan-European STOXX 600 index closed unchanged at 654.21 points, halting a recent decline from historic highs reached earlier in the month. The travel and leisure sector led advancers with a 1.7% gain, while media and personal & household goods stocks rose 1.4% each. Brent crude oil fell 1.9% to $90.69 per barrel, easing some inflation concerns.
Major European benchmarks showed mixed performance. London’s FTSE 100 advanced 0.35% to 10,854.32, while Frankfurt’s DAX slipped 0.11% to 26,106.60. Paris’s CAC 40 dropped 0.37% to 8,453.01, Milan’s FTSE MIB fell 0.24% to 52,542.18, and Madrid’s Ibex 35 gained 0.69% to 20,098.60. Lisbon’s PSI 20 rose 0.40% to 9,391.96.
Geopolitical risks remained a key focus, with markets monitoring U.S.-Iran tensions. Investors awaited details on potential secondary sanctions targeting countries with commercial ties to Iran, expected to be announced by U.S. Treasury Secretary Scott Bessent. The head of Pakistan’s army traveled to Tehran in an attempt to ease tensions.
Money markets priced in a more hawkish ECB stance, with deposit rate expectations rising toward 3% by the end of 2027. This shift reflects concerns that geopolitical instability could sustain inflationary pressures. Investors also awaited key economic data, including German and French GDP figures, the German Ifo survey, and Spanish inflation numbers, to reassess policy expectations.
Chris Beauchamp, chief market analyst at IG Group, noted the uncertainty surrounding the sanctions. He warned that if the U.S. action is perceived as a direct threat to Iran’s economy, Tehran could retaliate by disrupting shipping in the Strait of Hormuz, a scenario that would disproportionately impact European markets.
