Energy sector (.SXEP) jumped 1.4% as oil prices touched their highest level so far this month.
U.S. President Donald Trump on Monday responded to Iran's conditions for a peace deal with demands of his own, including compensation for people killed in wars, attacks and protests in a rhetorical escalation that could further complicate efforts to reopen the key oil shipping route.
"The pause this week reflects some caution around the Iran conflict and renewed pressure on oil prices. That is the key near-term risk for European markets," said Gordon Kerr, European Macro Strategist, at KBRA.
Travel and leisure sector (.SXTP) fell 0.9%, reflecting worries over elevated fuel costs.
InterContinental Hotels Group (IHG.L) edged down 1.8% after the Holiday Inn owner's room revenue growth slowed in the second quarter as a sharp decline in the Middle East offset continued gains in the U.S. and China.
Technology stocks (.SX8P), meanwhile, rose 0.5%. The sector remains among Europe's top performers this year, up about 24% year to date.
"European technology has benefited largely from the global AI story. Demand for chips, data centers and the wider AI build-out has supported the sector," said Kerr.
Investors are now awaiting euro zone employment and GDP data, as well as U.S. consumer price figures later this week, for further clues on the path of interest rates.
Among early movers, Alcon (ALCC.S) gained 4% after the Swiss-American eye-care company raised its full-year earnings forecast.
Spirax Group (SPX.L) slid 10.5% to the bottom of the STOXX 600 after the engineering firm reiterated its full-year forecast for mid-single-digit organic revenue growth and margin expansion.
The insurance sector (.SXIP) declined 0.6%, with Legal & General (LGEN.L) down 3.1% after UBS cut its rating on the stock to "Sell" from "Neutral."
Reporting by Tharuniyaa Lakshmi and Ragini Mathur in Bengaluru; Editing by Harikrishnan Nair and Rashmi Aich
This week on Reuters
