LONDON — European stock markets were set to edge down slightly on Monday as traders digested rising tensions in the Middle East following attacks by Israel and Hezbollah over the weekend.
Germany's DAX and Italy's FTSE Mib indexes are both expected to open down about 0.2%, while Spain's IBEX index is expected to open down about 0.13%, according to data from IG Index. France's CAC 40 index is expected to open flat.
UK markets will be closed on Monday for a bank holiday.
The move comes as oil prices rise amid fears of escalating conflict in the Middle East, with more than 100 Israeli air force fighter jets striking targets in Lebanon over the weekend and Iran-backed Hezbollah firing more than 320 rockets into Israel.
Brent crude rose 0.73% to $79.60 a barrel by 7:20 a.m. London time, while U.S. West Texas Intermediate crude rose 0.76% to $75.40 a barrel.
“While the market expectation is that an Iranian attack would hit Israel but not spark a wider regional conflict, the Israeli response will be equally important, as it could include attacks on Iranian oil supplies and associated infrastructure, putting 3-4% of global oil supplies at risk,” Vivek Dhar, mining and energy commodities strategist at Commonwealth Bank of Australia, told CNBC.
In the United States, stock futures were little changed after Federal Reserve Chairman Jerome Powell last week suggested that a rate cut was imminent. While the chairman did not specify when the first rate cut would come, traders are unanimously expecting a rate cut at the Fed's next meeting on September 18, according to CME Group's FedWatch tool.
Markets were mixed in the Asia-Pacific region, with Japan's Nikkei down 1.09%, Hong Kong's Hang Seng Index up 0.99% and mainland China's CSI300 index down 0.15%.
On the European calendar, investors will be keeping an eye on minutes of the Riksbank and Ifo economic climate data.
Later this week, euro zone inflation data is due to be released on Friday and will be closely watched for hints as to whether the European Central Bank will cut interest rates further next month.
—CNBC's Lim Hui Jie contributed to this report.
