European Stocks Tread Water Amid Rising Oil Prices and ECB Rate Hopes

European stocks closed flat on Monday as rising oil prices after renewed U.S.-Iran tensions fueled inflation worries, offsetting stronger-than-expected euro zone economic data. The pan-European STOXX 600 ended at 649.9 points, while the Swiss main index dropped 0.8%. Novartis fell 3.2% after its cholesterol drug failed in a closely watched study.

The German DAX fell 0.2%, with investors taking a muted reaction to the far-right AfD party's historic Saxony-Anhalt victory. The party advocates tougher immigration curbs, closer ties with Russia, reduced support for Ukraine, and a withdrawal from the euro.

Energy shares gained 1.2% as Brent crude futures hovered near six-week highs and moved closer to $100 a barrel due to supply disruptions. Data showed euro zone investor morale rose to its strongest reading in more than four years in September, while second-quarter GDP expanded 0.6% from the previous quarter and 1.2% year on year.

The European Central Bank is widely expected to raise rates by 25 basis points on Thursday, with traders still pricing in additional increases by year-end and one more in 2027.