European stocks edged higher on Monday as investors assessed developments in the latest US-Iran peace talks. Political uncertainty in the United Kingdom also influenced sentiment following reports that Prime Minister Keir Starmer could resign.
The pan-European STOXX 600 opened 0.1% higher. Germany’s DAX remained broadly unchanged, while France’s CAC 40 gained 0.1%.
Italy’s FTSE MIB moved in the opposite direction, slipping 0.1% during early trading.
UK Political Uncertainty Weighs on London Markets
London’s FTSE 100 traded close to unchanged as investors awaited an official statement from Downing Street.
The cautious market reaction followed media reports suggesting that Keir Starmer could step down. The speculation emerged after a parliamentary victory involving his internal political rival, Andy Burnham.
Until the government provides further clarity, uncertainty surrounding the prime minister’s position could continue to affect UK assets.
Investors Await ECB Policy Signals
European investors are also closely watching the European Central Bank.
ECB President Christine Lagarde and Chief Economist Philip Lane are scheduled to speak later in the day. Their comments could offer important clues about the central bank’s future monetary policy.
Markets want to understand how policymakers will balance persistent inflation pressures against signs that geopolitical tensions in the Middle East may be easing.
The ECB recently raised interest rates following inflationary pressures linked to the conflict. Therefore, any improvement in energy supply conditions could influence expectations for future policy decisions.
US-Iran Talks Create Mixed Market Signals
European stocks reached record highs last week after Washington and Tehran agreed to a major peace framework.
The agreement reopened the Strait of Hormuz, one of the world’s most important energy shipping routes. The development helped ease concerns about oil and gas supplies to Europe.
However, the situation has since become less clear.
Iran now claims that the Strait of Hormuz has been closed again. Meanwhile, maritime tracking data suggests that ships are still passing through the waterway.
The conflicting reports have increased uncertainty in markets following a volatile weekend.
Trump Threats Raise Questions Over Peace Deal
Geopolitical tensions intensified as US and Iranian negotiators began another round of talks in Switzerland.
US President Donald Trump threatened further military strikes against Iran. He linked the warning to continued fighting involving Hezbollah in Lebanon.
The comments raised doubts about whether the wider peace agreement can remain in place.
Iranian negotiators, however, said meaningful progress was being made during the talks. The lack of detailed information left investors cautious about the likelihood of a lasting settlement.
European Stock Rally Could Lose Momentum
Analysts warned that the European stock market rally recorded last week may begin to weaken.
Investor attention is gradually shifting away from geopolitical headlines and back toward company fundamentals, earnings expectations and market valuations.
European indexes remain near record levels. As a result, traders may become more selective when deciding which stocks still offer attractive growth potential.
Eurozone consumer confidence figures for June are also due later in the day. The report could provide further information about household sentiment and economic conditions across the region.
EasyJet Gains While Babcock Falls
Among individual stocks, EasyJet rose around 3% following a third takeover bid from Castlelake.
Babcock International fell nearly 4% after the company missed market expectations for pre-tax profit.
Meanwhile, BioArctic surged 8% after announcing a collaboration agreement with pharmaceutical group Eli Lilly.
The contrasting moves highlighted how company-specific developments continued to influence European markets despite the broader focus on politics and geopolitics.
