European shares steady as tech weakness offsets US-Iran optimism

European shares ended little changed on Monday as losses in technology stocks, led by ASML, stifled a rally fuelled by easing U.S.-Iran tensions and a sharp drop in oil prices.

The pan-European STOXX 600 index .STOXX closed flat at 644.52 points after earlier touching its highest level since July 7.

The technology index .SX8P fell 1.7%, reversing earlier gains, as ASML ASML.AS dropped 8.4%.

The Information reported that China has begun manufacturing domestically developed immersion deep ultraviolet lithography machines, a key chipmaking tool long dominated by ASML.

The weakness spread across the sector, with ASM International ASMI.AS falling 7.1% and BE Semiconductor BESI.AS dropping 9.7%.

Brent crude LCOc1 fell 7.2% to below $90 a barrel after Washington paused its airstrikes on Iran, and Tehran said it would halt attacks on U.S. bases in the Middle East in return.

Travel and leisure stocks .SXTP were among the biggest gainers, up nearly 2%, as lower oil prices improved the outlook for airlines. Lufthansa LHAG.DE, IAG ICAG.L and Ryanair RYA.I each gained more than 1%.

Energy stocks .SXEP fell 2%, making them the worst-performing sector on the STOXX 600. O/R

"The resilience of European stock markets is being driven by this reversal in oil prices, and it may last a while if we keep seeing crude prices come down," Chris Beauchamp, chief market analyst at IG, said in a note.

The recent flare-up in hostilities had reignited concerns about inflation, particularly in energy-importing regions such as Europe and Asia.

Investors are now focused on the U.S. Federal Reserve's policy decision on Wednesday for clues about the path of interest rates.

Markets expect the Fed to leave rates unchanged, while pricing in a 25-basis-point cut by the end of 2026, according to LSEG data.

Investors will also scrutinise results from major U.S. technology companies including Microsoft MSFT.O, Meta Platforms META.O, Amazon AMZN.O and Apple AAPL.O for signs of whether the AI-driven market rally can continue.

Among other stocks, AstraZeneca AZN.L gained 1.7% after the drugmaker topped second-quarter profit expectations and reaffirmed its 2026 forecasts.

Vodafone VOD.L advanced 4.9% after the telecom firm raised its outlook to reflect its recent purchase of a controlling stake in Kenya's Safaricom, and said it expects to deliver results at the upper end of its revised range.

Zabka ZAB.WA fell 9.6% after Japan's Seven & I Holdings 3382.T decided not to proceed with a potential investment in the Polish convenience store operator.

-Reporting by Tharuniyaa Lakshmi and Purvi Agarwal and Avinash P in Bengaluru. Editing by Amanda Cooper, Vijay Kishore and Mark Potter/Reuters