European stocks recovered from early losses to trade between flat and slightly higher in the afternoon on Monday, after a diplomatic breakthrough in the Middle East helped calm global energy markets, sparking a late-session rally across regional indices.
The pan-European STOXX 600 index rose 0.10%, returning to positive territory. In contrast, London's FTSE 100 index of leading shares fell 0.40%, while Germany's DAX index rose 0.20% and France's CAC 40 index climbed 0.30%.
Stocks across the continent had spent the morning hours under sustained pressure, weighed down by ongoing geopolitical tensions related to the conflict between US forces and Iran, which has now entered its ninth consecutive day.
However, sentiment shifted after Tehran indicated the possibility of proceeding with negotiations between the United States and Iran based on national interests, which led to a sudden reversal of crude oil prices from their early gains and a shift into negative territory.
Geopolitical concerns continue to weigh on the market, as the conflict between US forces and Iran continues for the ninth day in a row.
This volatility in energy prices adds further complexity to the picture facing the European Central Bank, which is scheduled to meet next Thursday. Observers widely expect policymakers to leave the main interest rate unchanged at 2.25%, following the increase in June.
However, analysts point out that the renewed rise in oil and gas prices will likely push European Central Bank President Christine Lagarde to adopt a more hawkish tone, while keeping the option of raising interest rates in September firmly on the table.
Technology sector guidelines are in focus
Although European indices lack the heavy concentration in the technology sector that dominates Wall Street and major Asian markets, the continent's industrial and semiconductor companies remain closely linked to US technology spending.
Wall Street giants Alphabet, Tesla and Intel are scheduled to announce their results later this week.
Given that major US technology companies are key customers of European chip equipment manufacturers, software providers, and precision engineers, their future direction is of critical importance to regional market sentiment.
In company news, major European energy companies such as Shell, BP and TotalEnergies outperformed the broader market, with their shares rising by more than 1% each, benefiting from a 2.20% increase in crude oil prices.
In contrast, airline stocks declined broadly, with Ryanair and Lufthansa shares each losing more than 2%.
Among the most notable corporate updates, Segro's stock fell by 1.50% after it rejected an improved offer from Prologis.
Thule's stock fell by about 5% following its failure to meet second-quarter sales estimates.
Meanwhile, IP Group's stock rose 4% after Railpen announced an improved takeover bid.
