Brent crude climbed to $97.63, up 1.4%, while WTI rose 1.8% to $93.10 a barrel following US strikes on three Iranian oil tankers over the weekend.

The geopolitical escalation saw Tehran threaten a new restricted zone outside the Strait of Hormuz, warning of strike risks near Oman's Khasab. Reports also indicated a Saudi Aramco facility was hit in fresh strikes.

European equities closed near flat on Monday while US markets observed Labor Day. The DAX 40 slipped 0.2% to 26,005, masking underlying political uncertainty after the far-right AfD party won roughly 44% of the vote in Saxony-Anhalt.

Market Movements

German 10-year Bund yields rose about 5 basis points to 3.39%, approaching the multi-year high of 3.3951%. Italy's 10-year yield climbed 7 basis points to 4.22%, while France's added 4 basis points to 4.25%.

In commodities, copper surged to an all-time high above $14,530 a tonne on the London Metal Exchange. Gold slipped 0.4% to $4,415 an ounce, while silver added 0.5% to $66.30. European gas jumped 2.1%, extending its month-to-date gain to 20.8%.

Stock Movers

Infineon Technologies AG soared 6.4% to 60.50, driven by AI enthusiasm following OpenAI's GPT-6 Astra launch. ASML Holding NV gained 2.3% and STMicroelectronics NV rose 4%.

Energy stocks benefited from higher crude prices. TotalEnergies SE rose 1.5%, Shell PLC gained 1.1%, and BP PLC rose 1.3%. Conversely, Novartis AG fell more than 3% after its cholesterol drug failed to meet expectations in a study.

What the Numbers Show

The divergence between flat equity indices and rising bond yields suggests investors are pricing in higher rates rather than reacting to immediate corporate earnings. With the ECB widely expected to deliver a 25-basis-point hike on Thursday and traders pricing a 90% probability of another hike by year-end, rate-sensitive sectors like software (SAP SE shed 1.9%) faced headwinds despite broader AI-driven tech gains.

European equity markets are set to open on a mixed note Tuesday, as traders weigh a fragile ceasefire between Israel and Iran while keeping a close eye on the upcoming European Central Bank (ECB) policy decision later this week. Futures across the continent's major benchmarks are trading in slightly negative territory, signalling a cautious and directionless start to the session.

European Futures at a Glance

The futures market is reflecting a broadly subdued picture for European equities ahead of Tuesday's open. The following table summarises the pre-market performance across key European indices:

Germany's DAX futures are leading the modest declines, down 0.25%, followed by France's CAC futures, which are lower by 0.21%. The UK's FTSE futures are also in the red but remain the most contained, declining 0.09%.

Key Factors Shaping Sentiment

Two primary themes are driving the cautious mood across European markets:

• Israel-Iran ceasefire: Traders are carefully assessing the durability of a fragile ceasefire between Israel and Iran. While the development offers some relief from acute geopolitical risk, uncertainty over its sustainability continues to temper investor confidence.
• ECB policy decision: Market participants are also positioning ahead of the ECB's upcoming interest rate decision later this week, with the outcome expected to provide clearer direction on the monetary policy path for the eurozone.

Market Outlook

The muted signals from European futures reflect a broader sense of caution as traders navigate a complex mix of geopolitical and monetary policy developments. With the ceasefire situation remaining fluid and the ECB decision on the horizon, market participants appear to be adopting a wait-and-see approach. The extent of movement at the open will likely depend on further developments on both fronts as the session progresses.