European markets continue negative trend amid Middle East tensions

European stock markets experienced a negative trend on Monday, influenced by persistent geopolitical tensions in the Middle East and their potential to reignite global inflation. The ongoing conflict has led to a surge in oil prices and heightened concerns over the security of vital shipping lanes, particularly the Strait of Hormuz.

CENTCOM reported that Iran's military coastal surveillance, air defense facilities, and missile and drone storage sites were targeted on the eighth night of strikes against Iran. The potential disruption to oil shipments through the Strait of Hormuz and risks to other trade routes have driven up oil prices. Reports of oil tankers being hit in the strait have further fueled anxieties about global energy supply.

As of 10:20 AM CET, the Stoxx Europe 600 index was down 0.4% at 640.1 points. Other major European indices also saw declines: the UK's FTSE 100 fell 0.7% to 10,522, Germany's DAX 40 dropped 0.3% to 24,760, Italy's FTSE MIB 30 lost 0.4% to 51,665, France's CAC 40 decreased 0.2% to 8,321, and Spain's IBEX 35 was down 0.4% at 19,135.

Beyond the Middle East developments, market sentiment is also being shaped by political events and macroeconomic data. In the UK, attention is on Andy Burnham's first speech as prime minister for signals on the country's economic direction. This week, the European Central Bank's (ECB) monetary policy decisions and subsequent guidance from ECB President Christine Lagarde are closely watched. The ECB is expected to keep interest rates unchanged at its upcoming meeting but is anticipated to implement a rate hike in September.

On the macroeconomic front, Germany reported that its producer price index rose by 1.8% year-on-year in June. This increase was primarily driven by a 5.1% rise in intermediate goods prices. While energy prices saw a slight increase of 0.4% year-on-year in June, they fell 1.8% month-on-month. This follows a sharp rise in energy prices after the Middle East conflict, which had partially subsided following an agreement between the US and Iran in June.