European stocks moved sideways on Monday, holding near three-week lows, as a sharp escalation in economic threats between the United States and Iran kept risk appetite restrained, despite a slight dip in crude oil prices.
The pan-European Stoxx Europe 600 index fell 0.10% in early trading, settling at levels not seen since the beginning of August.
The German DAX index, the French CAC 40 index, and the British FTSE 100 index all traded with little change.
The United States escalates the conflict with Iran with the largest financial attack in history.
Market focus remains on the Arabian Gulf region following the sharp US escalation over the weekend.
The United States threatened Tehran with what it called the largest financial assault ever launched, announcing plans to unveil a comprehensive package of economic sanctions on Monday, specifically targeting and punishing any foreign countries or trading partners that provide a vital lifeline to Iran.
This statement prompted a sharp response from Tehran, with Iranian officials vowing to completely shut down all energy exports originating from the Arabian Gulf if the US economic war continues.
Sovereign bond and energy teams are awaiting a press conference scheduled for 10:00 PM Saudi Arabia time on Monday, to be held by US Treasury Secretary Scott Bisent, in which he is expected to outline new punitive measures.
Brent crude oil futures fell by about 1.50% to trade around $91.80 a barrel on Monday, providing a temporary reprieve following a 5% rise last week.
The continued paralysis of transit through the Strait of Hormuz is restricting seaborne flows of crude oil and liquefied natural gas, reinforcing a structural supply premium in global inflation expectations.
Nvidia results and the Jackson Hole speech dominate a crucial week
Semiconductor giant Nvidia will release its second-quarter results after the US markets close, in what represents the most important partial test for global stocks.
The question revolves around whether AI capital expenditures can continue to justify the inflated valuations of tech giants. With major AI companies flooding credit markets with record-breaking bond issuances to finance data center expansion, any sign of slowing revenues or a downward revision of future guidance could trigger a sharp correction in European tech-heavy stock exchanges.
Federal Reserve Chairman Kevin Warsh will deliver his keynote address at the Jackson Hole Economic Policy Symposium.
Bond and equity teams will scrutinize his remarks for clues as to whether the Federal Reserve intends to keep interest rates unchanged in September following the FOMC's 9-3 split vote, or whether persistent energy-driven inflation will force policymakers to implement a further rate hike.
On the individual stock level, shares of BW Offshore fell by 14% after the company lowered its pre-tax profit forecast.
