European stocks fluctuated in a narrow range on Monday (24th) as investors digested the United States’ expanded sanctions against Iran, with the Stoxx Europe 600 closing at 654.21 points, up a marginal 0.03 points to barely hold above the flatline. Investors were also awaiting a slate of European economic data due this week to gauge the European Central Bank’s (ECB) next policy moves.
Major national benchmarks were mixed. The UK’s FTSE 100 rose 0.35% to 10,854.32; Germany’s DAX slipped 0.11% to 26,106.60; and France’s CAC 40 fell 0.37% to 8,453.01. Italy’s FTSE MIB declined 0.24%, while Spain’s IBEX 35 gained 0.69%, emerging as a regional bright spot.
US Treasury Secretary Scott Bessent was preparing to unveil details of secondary sanctions targeting countries that maintain economic ties with Iran. He announced “Operation Economic Outcast” on the afternoon of the 24th US Eastern Time, expanding secondary sanctions against nations and entities doing business with Iran, covering digital assets, technology, gold, aviation, and shipping sectors, in a bid to further sever Iran’s revenue streams.
Markets worried that Iran could escalate conflict in the Strait of Hormuz, dampening investors’ willingness to chase gains. Chris Beauchamp, chief market analyst at IG Group, noted that uncertainties remain around the new sanctions; if Iran perceives the US actions as an economic threat, it could take further countermeasures in the Strait of Hormuz. Pakistan is also mediating in hopes of bringing Iran back to the negotiating table.
Sector Divergence as Oil Pullback Drives Fund Flows
Brent crude futures fell more than 2%, lifting travel and leisure stocks by 1.73% to become the buying focal point among the 20 major sector groups; media and personal & household goods each rose 1.40%. Energy stocks dropped 1.57% alongside oil prices, becoming the biggest source of selling pressure. Defense and auto parts stocks each fell around 1.00%, while technology shares slipped 0.80% as markets turned cautious ahead of Nvidia’s earnings release on Wednesday.
Among individual stocks, British energy giant BP fell 2.9% as international oil prices retreated.
IndexCloseChangeStoxx Europe 600654.21+0.03 ptsFTSE 10010,854.32+0.35%Germany DAX26,106.60-0.11%France CAC 408,453.01-0.37%Italy FTSE MIB—-0.24%Spain IBEX 35—+0.69%
Note: Closing levels for the Italian and Spanish indices were not disclosed in the source.
Money markets are now pricing in a more hawkish stance from the European Central Bank. Geopolitical risks and energy prices could keep inflation elevated, with markets estimating the deposit rate could approach 3% by end-2027. European equities have pulled back in recent weeks after hitting record highs in early August, with the unresolved Middle East conflict adding to inflationary pressures — a key driver behind the market’s hawkish repricing of the central bank.
This week’s German and French gross domestic product (GDP) data, Germany’s Ifo business climate index, and Spanish inflation figures will serve as crucial tests for rate expectations. The eurozone’s flash composite purchasing managers’ index (PMI) for August already rose to its highest level since November 2025, driven by increased manufacturing new orders and a recovery in export growth, signaling a degree of resilience in the European economy.
Geoff Yu, senior market strategist for EMEA at BNY, noted that the European economy continues to send cautious recovery signals — industrial activity is improving but demand has not surged across the board. The current environment is approaching a “Goldilocks” scenario, with growth sufficient to bolster confidence, though the ECB must remain vigilant on inflation.
On fund flows, LSEG/Lipper data showed that European equity funds attracted $2.44 billion in inflows during the week ending August 12, the largest weekly inflow since the week of February 25, indicating that institutional interest in European markets is rekindling.
US AI chip leader Nvidia is set to report earnings this week, with markets closely watching whether the AI trade’s momentum can be sustained. Analysts suggest that European markets are less exposed to AI-trade volatility and offer greater clarity on the monetary policy outlook, which may partly explain European equities’ relative resilience in recent sessions.