European Stocks Set for Muted Open

Both the STOXX 50 and the STOXX 600 fluctuated around the flatline on Monday, starting the week on a cautious note as tensions in the Middle East persisted, with no signs of a swift resolution to the conflict. US President Trump rejected Iran’s counterproposal aimed at ending the 10-week conflict, calling it “totally unacceptable,” while Tehran vowed to “never bow.” As a result, oil prices moved higher, fueling concerns over the economic impact of a prolonged oil shock. Defense stocks came under pressure, with shares of Rheinmetall falling 3.6% and Leonardo down 3.8%. Luxury names also traded in negative territory, including LVMH (-1.3%), L'Oréal (-1.1%), and Hermès (-1.9%). On the other hand, shares of Novo Nordisk surged nearly 5%, while energy stocks advanced alongside higher oil prices, with Shell gaining 0.6% and TotalEnergies up 0.9%.

European equity markets were set for a muted open on Monday as the US and Iran continued to struggle toward a diplomatic resolution to the 10-week conflict. President Donald Trump dismissed Iran’s response to his peace proposal as “TOTALLY UNACCEPTABLE,” while Tehran reportedly demanded an end to military operations on all fronts as well as the removal of sanctions. Israeli Prime Minister Benjamin Netanyahu also stated that the conflict is not over, emphasizing that the US and Israel remain committed to limiting Iran’s nuclear ambitions. Meanwhile, investors had little economic or corporate news from Europe to drive sentiment, with no major data releases or earnings reports scheduled for Monday. In premarket trading, futures linked to the Euro Stoxx 50 and Stoxx Europe 600 were broadly flat to slightly higher.

European stocks closed sharply lower for a second session on Friday as fresh strikes between Iran and the US added to risks of energy shortages for major European importers. The Eurozone's STOXX 50 fell 1.1% to 5,905 and the pan-European STOXX 600 dropped 0.8% to 612. Tankers and military vessels were reportedly hit during the day to dim expectations that the US and Iranian delegations were closer to agreeing on an end to the war, driving markets to reconsider the positions taken during Wednesday when the consensus saw more optimism in the conflict's end. Risk-sensitive consumer cyclical stocks closed lower, with Hermes, Adidas, and Inditex dropping more than 2.5%. Meanwhile, Safran fell 3% for another session of sharp selling, and Rheinmetall sank 10% as investors continued to assess the company's earnings report from yesterday. Meanwhile, Intesa Sanpaolo dropped 2% after posting its earnings report.