European equity markets opened the week on a positive note Monday, with major indices across the continent trading in the green. Germany's DAX, France's CAC 40, Italy's FTSE MIB, and the UK's FTSE 100 all posted gains at the opening bell, even as diplomatic efforts between the United States and Iran appeared to stall.
The White House confirmed over the weekend that it had called off plans to send envoys to Pakistan for further negotiations. US President Donald Trump told Fox News on Sunday, “If they want, we can talk but we’re not sending people.” Earlier, he posted on social media: “All they have to do is call!!!” The abrupt halt in talks comes after weeks of indirect exchanges, with Iran's foreign minister recently ruling out direct negotiations with Washington.
The breakdown in diplomacy has kept geopolitical risk elevated, particularly for energy markets. Brent crude oil for July delivery rose $1.44 to $100.57 a barrel, while US benchmark West Texas Intermediate added $1.28 to $95.65. The Strait of Hormuz remains a key chokepoint, and any disruption there could push European fuel prices higher again, as recent disruptions have already shown.
Central Bank Decisions in Focus
Beyond the Middle East, investors are closely watching monetary policy decisions due this week from the European Central Bank and the US Federal Reserve. The ECB is expected to hold rates steady, but markets will parse President Christine Lagarde's remarks for any signal on future moves amid persistent inflation and slowing growth. The Fed, meanwhile, faces a delicate balancing act as it weighs price pressures against the risk of tipping the economy into recession.
Germany's economic outlook has already been clouded by the ongoing conflict. The government recently slashed its 2026 GDP forecast to 0.5%, citing energy market disruptions linked to the Iran war. Higher fuel costs are squeezing households and businesses across the bloc, with European fuel prices still 12% above pre-strike levels despite a temporary ceasefire.
Asia-Pacific Markets Mixed, Tech Shares Rally in Taiwan
Overnight trading in the Asia-Pacific region delivered a mixed picture. Tokyo's Nikkei 225 surged 1.4% to a fresh record of 60,564.18, driven by strong demand for technology and export-oriented stocks. South Korea's Kospi jumped 2.1% to 6,617.94, while Taiwan's Taiex rallied 2.6%, buoyed by a revival in tech buying linked to the artificial intelligence boom.
Hong Kong's Hang Seng index edged 0.1% lower to 25,951.86, and the Shanghai Composite index rose 0.2% to 4,089.04. Australia's S&P/ASX 200 slipped 0.3% to 8,759.40. Currency markets saw the dollar weaken slightly, falling to 159.34 Japanese yen from 159.59, while the euro edged up to $1.1723 from $1.1701.
The mixed performance in Asia underscores the uneven global recovery and the varying impact of geopolitical tensions on different economies. For Europe, the key question remains whether the region can sustain its growth momentum amid energy price volatility and uncertainty over US foreign policy.
As the week unfolds, traders will also monitor any further developments in US-Iran relations. The failure to make progress in talks leaves the door open for renewed tensions, which could roil markets again. For now, European investors appear to be betting that central bank support and resilient corporate earnings will outweigh the geopolitical headwinds.
