European markets remained cautious on Monday as military tensions in the Persian Gulf and the continuing war in Iran supported energy prices, adding to inflation concerns before the European Central Bank's policy decision on Thursday. The DAX 40 was flat to lower near 26,020, while earlier trading showed the STOXX 600 down 0.1% at 649.17 points and Swiss equities lower. Continental bonds also remained under pressure as money markets almost fully priced a 25-basis-point ECB rate increase. Eurozone inflation has moved above 3%, exceeding the central bank's 2% target, while conflict-driven energy costs have reduced expectations for a near-term easing in price pressures. Earlier market coverage indicated that investors were pricing a 2.75% policy rate, while prior reports described a planned increase to 2.50% followed by a possible December move to 2.75%. Political developments added to uncertainty in Germany after the far-right AfD won in Saxony-Anhalt, dealing a setback to Chancellor Friedrich Merz's CDU. Earlier coverage said exit polls placed the AfD at 44% of the vote. Energy shares had risen as Brent crude gained more than $1 a barrel following U.S.-Iran attacks involving vessels in the Strait of Hormuz and other areas.