European equities hovered near multi-month lows as investors assessed escalating Middle East tensions, elevated sovereign bond yields and calls from technology leaders to temporarily slow advanced artificial intelligence development. The Stoxx Europe 600 fell 0.4%, while Germany’s DAX declined 0.2%, France’s CAC 40 and London’s FTSE 100 each dropped 0.4%, and Italy’s FTSE MIB lost nearly 1%. Brent crude futures rose another 1.2% to above $113 a barrel, extending a multi-week rally to fresh highs. Riyadh blamed Iran-backed elements in Iraq for a targeted strike on Saudi Arabia’s East-West pipeline and warned the disruption could affect up to 4% of global oil supplies. Fresh attacks by Yemen’s Houthi militants on Saudi territory and maritime transit corridors further reduced prospects for the near-term reopening of the Strait of Hormuz after peace talks in Oman were postponed. Markets adopted a defensive stance ahead of the Federal Reserve’s two-day policy meeting, with investors pricing a 90% probability of a 25-basis-point federal funds rate increase on Wednesday. That would be the first Fed rate hike since mid-2023, following the European Central Bank’s quarter-point increase to 2.50% last week. The U.S. 10-year Treasury yield remained near 4.98%, while Germany’s 10-year Bund yield held at 3.51%, amid persistent inflation and Friday’s stronger-than-expected U.S. CPI reading. Technology and semiconductor stocks in Frankfurt and Amsterdam extended recent losses after executive leaders at OpenAI and Anthropic jointly called for a temporary slowdown in advanced AI model development to establish global risk-management standards. Investors were also awaiting Germany’s ZEW Economic Sentiment index for signs of how energy costs and central-bank tightening are affecting business confidence in the euro zone’s largest economy.