European stocks flat as markets weigh Iran tensions, await economic data

European shares were flat on Monday as markets monitored U.S.-Iran developments and looked ahead to a busy week of economic data that ‌could offer fresh clues on the European Central Bank's policy path.

Investors braced for details of potentially tougher U.S. secondary sanctions on countries with trade ties to Iran, expected to be announced by Treasury Secretary Scott Bessent. Separately, Pakistan's army chief is in Tehran to ‌bring Iran back to the negotiating table. "There are a lot of unknowns riding on this (sanctions) at the moment," said Chris Beauchamp, ‌chief market analyst, IG Group.

"If you have a situation where the U.S. action is taken as a threat to the Iranian economy and they respond in the only way they can and then take action in the Strait of Hormuz, it would be particularly bad for European markets." The pan-European STOXX 600 ⁠closed unchanged ​at 654.21 points.

The threat of sanctions ⁠follows fears of prolonged inflation that gripped global markets last week as U.S. Treasury yields hit a multi-decade high amid persisting tensions in the Middle East ⁠that have kept oil prices elevated. Among sectors, energy-intensive travel and leisure stocks led gains, rising 1.7% as Brent crude declined 1.9%.

Media and personal ​and household goods shares rose 1.4%. The benchmark STOXX 600 has pulled back in recent weeks after reaching record highs earlier ⁠this month on an earnings-fuelled rally with inflation concerns taking centre stage.

Money markets are pricing in a more hawkish move from the European Central Bank, betting geopolitical ⁠tensions ​could keep price pressures elevated and drive the deposit rate close to 3% by late 2027. Investors are also awaiting a string of economic releases this week, including German and French GDP data, the German Ifo survey and Spanish inflation figures, that ⁠could test expectations for a more hawkish ECB amid renewed pressure from energy prices.

Energy fell 1.6%, tracking oil, to be the worst-performing sector. ⁠Defence stocks also slipped 1%. Automobiles and ⁠parts fell 1% despite data showing European EV sales picked up in July.

Meanwhile, the tech sector slipped 0.8% ahead of Nvidia's results on Wednesday, with lingering concerns about whether the chipmaker can ‌meet stratospheric expectations.