European Stocks Head for Lower Open

European stocks started the week on a weaker footing, with the STOXX 50 falling 1% and the STOXX 600 losing 0.8%, as investors returned from the weekend to renewed geopolitical tensions in the Middle East and a sharp rise in oil prices. Iran and Israel exchanged fresh strikes, undermining an already fragile ceasefire and raising concerns that efforts to end the conflict may be stalling. The broad-based selloff weighed on most sectors, while energy stocks outperformed as crude oil prices surged nearly 4%. Additionally, concerns that the AI-driven market rally may have become overstretched continued to weigh on investor sentiment. ASML Holding fell 1.8%, SAP declined 1.3%, and Prosus lost 1%. Other notable laggards included Safran (-2.6%), Siemens (-2.0%), and Hermes (-1.9%). Meanwhile, Intesa Sanpaolo tumbled about 4% after announcing a €30.6 billion unsolicited cash-and-share bid for Banca Monte dei Paschi di Siena, whose shares surged nearly 10% on the news.

European equity markets were were set to open sharply lower on Monday as renewed tensions in the Middle East and growing expectations of higher interest rates dampened investor sentiment. Iran and Israel exchanged missile strikes despite President Donald Trump's calls for both sides to end the hostilities and return to peace negotiations. The escalation pushed oil prices higher, intensifying inflation concerns and clouding the global economic outlook. Meanwhile, global equity markets also faced pressure from rising Treasury yields after stronger-than-expected US jobs data reinforced expectations that the Federal Reserve could raise interest rates later this year. In Europe, investors will turn their attention to German factory orders data, while the corporate earnings calendar remains relatively quiet. In premarket trading, Euro Stoxx 50 futures were down 1.5%, while Stoxx 600 futures lost 1.3%.

European equity indices closed lower on Friday amid the prolonged impasse between the US and Iran and the outlook of higher rates by major central banks. The Euro STOXX 50 fell 0.4% to 6,080 and the STOXX Europe 600 pared gains to close below the flatline at 623. The ECB is due to raise its interest rates next week after updated data reflected relatively steady growth in the main Eurozone economies, save for Ireland, which had a swing in flows for multinational companies pressure the bloc's GDP. In turn, expectations of a Fed hike this year gained ground after amid strong US jobs report and little hopes of a significant recovery in energy prices. AI infrastructure stocks sank further after the muted outlook for Broadcom triggered a pivot out of the sector. Infineon, Adyen, and Nokia fell over 7%. In turn, UniCredit, BBVA, and ING dropped around 1% each. Both the Euro STOXX 50 and STOXX Europe 600 were due to close the week with muted changes.