European shares were subdued on Monday as investors assessed the latest round of U.S.-Iran negotiations for signs of progress toward resuming shipping through the Strait of Hormuz, a critical artery for global oil trade.
The pan-European STOXX 600 index (.STOXX) was down 0.05% ar 635.27 points by 0926 GMT. The construction & materials sector (.XOP) led losses with a 1% decline.
Brent Crude prices declined 1%, and were trading below $80 per barrel after mediators Qatar and Pakistan said that Washington and Tehran had agreed on a roadmap for a final deal and measures to safeguard shipping through the strait.
However, uncertainty lingered as Tehran had declared the waterway closed on Sunday, citing no end to fighting between Israel and Lebanon.
"There is still a little bit of uncertainty just with regard to what the picture is with the Strait of Hormuz. There do appear to be some vessels passing through, which is obviously keeping equities supported," said Fiona Cincotta, senior market analyst at City Index.
"As long as we've got the oil prices below $80 a barrel, that's keeping the market relatively buoyant."
The benchmark STOXX index hit a record high last week on optimism over Middle East peace talks. However, hawkish projections from U.S. Federal Reserve were a reminder that inflation concerns and higher energy costs are likely to linger.
Traders will parse comments from European Central Bank President Christine Lagarde later in the day as they continue to price in a 25-basis point rate hike later this year, according to LSEG-compiled data.
Tech stocks (.SX8P) led sectoral gains, rising 1.1%, with chipmaker Infineon (IFXGn.DE) gaining 4.7%, tracking advances in Asian equities.
In M&A activity, shares of budget airline easyJet (EZJ.L) rose 2.9% after U.S. investment firm Castlelake went public with a £4.74 billion ($6.26 billion) offer.
Among other movers, the UK's defence and engineering group Babcock (BAB.L) dropped 3.5% following a sharp decline in its annual profit on a £140 million frigate charge.
On the data front, flash euro zone consumer confidence data is due later in the day.
($1 = 0.7571 pounds)
