Oil Price Surge Triggers ECB Rate Hike Expectations

European stocks were subdued on Monday as higher oil prices following fresh US-Iran attacks intensified inflation concerns and strengthened expectations that the European Central Bank could raise interest rates later this week, according to Reuters.

The pan-European STOXX 600 index was down 0.1% at 649.17 points by 0711 GMT. The Swiss benchmark index underperformed, falling 1.2%, while Germany's DAX was broadly flat.

Energy stocks gained 1.2% as oil prices climbed amid growing concerns over supply disruptions. Brent crude futures rose by more than $1 a barrel after tit-for-tat strikes between the United States and Iran involving vessels in the Strait of Hormuz and other areas heightened fears of a prolonged disruption to oil supplies.

The rise in energy prices has renewed concerns about inflation, potentially increasing pressure on central banks to maintain or tighten monetary policy. The ECB is widely expected to raise interest rates by 25 basis points on Thursday, with investors closely watching the central bank's guidance on the outlook for further policy tightening.