US-Iran Tensions Send Oil Prices Soaring, European Stocks Waver

European stocks wavered on Monday after news of fresh US-Iran strikes sent oil prices soaring, benefiting energy shares. The STOXX 600 index initially dipped but recovered to remain roughly flat, with energy stocks rising as Brent crude jumped over 2% to $90.70 a barrel.

The geopolitical tensions prompted investors to add a 'risk premium' to oil prices, which can impact inflation expectations and bond yields. Higher inflation expectations can weigh on rate-sensitive equities, such as Germany's DAX, which fell 0.5% ahead of key economic data releases.

Investors are closely watching this week's inflation prints in the eurozone and US payrolls, as these numbers will influence policymakers' decisions on interest rates. A sustained rise in oil prices can push headline inflation higher and make central banks more cautious about easing monetary policy.