European markets light on volume and high on hopes

As global markets opened on Monday, investors largely shrugged off the weekend’s headlines, including concerns over the potential for an expanded Middle East conflict. Instead, markets traded cautiously, with a slight focus on optimism surrounding a possible agreement to reopen vital shipping lanes in the Strait of Hormuz.

U.S. stock futures (S&P 500 ESc1) dipped by 0.6% during Asia's lunchtime, though the decline was marginal and occurred on thin trading volumes, suggesting a temporary pullback from the record highs seen on Friday. Most Asian markets posted modest gains, while European futures (STXEc1) fell by 1.1%.

In the commodities market, oil futures (LCOc1) initially spiked but eventually settled around 5-6% higher, hovering just below the $100-per-barrel mark.

Tensions remained high in the Middle East as the U.S. reported it had seized an Iranian cargo ship attempting to bypass the blockade in the Strait of Hormuz. Iran has vowed to retaliate, and the country also announced its refusal to participate in the second round of U.S.-led negotiations that had been planned before the ceasefire expires on Tuesday.

European allies have voiced concerns over the handling of the negotiations, suggesting that the U.S. may be pushing for a headline-grabbing deal with Iran that could lead to unforeseen complications down the line. Canada’s Prime Minister Mark Carney echoed these concerns, stating that while close ties to the United States were once considered a strength, they have now become a liability, signaling how the ongoing conflict is reshaping diplomatic relations.

Despite these tensions, broader market sentiment remained relatively upbeat. Traders were encouraged by data from Kpler showing that more than 20 ships transited the Strait of Hormuz on Saturday, the busiest day since March 1, easing fears that the shipping lanes would remain blocked.

Meanwhile, other market drivers such as earnings reports and economic data are slowly making their way back into focus. In London, British Prime Minister Keir Starmer will face questions in Parliament over his handling of the controversial appointment of Peter Mandelson as U.S. ambassador. Mandelson’s ties to convicted sex offender Jeffrey Epstein led to his dismissal last September, and now calls for Starmer’s resignation are mounting.

Key Developments to Watch on Monday:

U.S.-Iran relations and developments in the Strait of Hormuz

Keir Starmer’s parliamentary address and the fallout from the Mandelson appointment

Canada’s Consumer Price Index (CPI) data

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-Editing by Jacqueline Wong/Reuters