(Alliance News) - Major European indices opened lower on Monday as Middle East tensions flared up, while mounting expectations of higher interest rates weighed on investor sentiment.

Iran and Israel continued to exchange missile strikes despite calls from US President Donald Trump to resume negotiations.

Rising oil prices are fueling inflation concerns, while stronger-than-expected US labor data has bolstered expectations of a Federal Reserve rate hike before the end of the year.

In Italy, the week begins under the sign of banking consolidation, with Banca Monte dei Paschi di Siena at the center of interest and competing offers from Banco BPM and Intesa Sanpaolo.

Consequently, the FTSE MIB fell into fractional red at 49,879.00 points, the Mid-Cap shed 0.2% to 61,450.66 points, the Small-Cap edged up 0.1% to 35,299.61 points, while Italy Growth gained 0.2% to 9,184.01 points.

London's FTSE 100 is down 0.2%, the Paris CAC 40 shed 0.7%, while the Frankfurt DAX 40 retreated 0.9%.

Back in Milan, on Piazza Affari's blue-chip index, Banca Monte dei Paschi di Siena, at the heart of the banking M&A wave, shot to the top at the open, rising in double digits with an 11% gain and over 47 million shares already traded.

Banco BPM - down 1.2% - has proposed a merger of equals to MPS to create Italy's second-largest banking group. The transaction would generate synergies exceeding EUR1.1 billion, a market capitalization over EUR50 billion, a CET1 ratio of 15%, and a steady-state net profit of approximately EUR6 billion, with estimated value creation of at least EUR5.5 billion.

Sliding to the bottom of the main index was Intesa Sanpaolo, which launched a public exchange and purchase offer (OPAS) for MPS, offering 16 of its own shares for every 10 shares tendered plus EUR1 in cash, with premiums of up to 18.7%.

The deal involves the sale of 635 MPS branches to Unipol - up 0.8% - and targets a net profit of over EUR16 billion in 2029, with annual synergies of EUR2.9 billion.

Selling pressure hit FinecoBank - down 0.4% - which announced on Monday that May net inflows reached EUR1.54 billion, a 17% increase compared to EUR1.31 billion in the same month of 2025, bringing the total for the first five months of the year to EUR7.49 billion from EUR5.78 billion, representing 30% year-on-year growth.

Among the decliners was Banca Mediolanum - down 0.3% - which reported on Monday that the group's total commercial volumes in May reached EUR1.17 billion, bringing the total for the first five months of the year to EUR7.20 billion from EUR6.99 billion in the same period of 2025.

Total net inflows for the month stood at EUR785 million, for a year-to-date total of EUR5.42 billion compared to EUR5.38 billion recorded in the first five months of 2025.

UniCredit opened the week's trading down 0.8%. Following the initial success of its exchange offer for Commerzbank, the Gae Aulenti-based institution is already looking toward its next milestone.

Tenders reported last week, amounting to 7.6% of the capital, combined with the stake already held, allowed the bank led by Andrea Orcel to surpass the 30% minimum threshold.

This stake adds to a 26.8% direct holding and physical settlement instruments equal to 3.2%, bringing UniCredit's control to 34.4% and 37.6% of the German bank's capital, respectively. Including derivative instruments for a further 13.2%, the Italian lender can already count on an exposure exceeding 50% of Commerzbank.

With the offer open until June 16, and potentially extendable until early July, Orcel now aims to reach a stake close to two-thirds of the capital, or 66%, a level that would facilitate future governance and integration processes between the two groups.

On the Mid-Cap, Caltagirone led the basket's gains, rising 5.0% at the start, rebounding after five consecutive sessions in the red.

Safilo Group performed well, advancing 4.6%. The group announced on Monday that its subsidiary Safilo has mandated Kepler Cheuvreux to launch a share buyback program for up to 10 million ordinary shares, representing approximately 2.5% of the share capital, for a maximum total value of EUR20 million.

Pirelli & C - up 0.3% - announced on Monday that shareholders China National Tire & Rubber Corporation, Ltd. and Marco Polo International Italy Srl have filed two separate appeals with identical content before the Lazio Regional Administrative Court against, among others, the Presidency of the Council of Ministers and the Ministry of Enterprises and Made in Italy.

Juventus Football Club opened lower - down 0.3% - after stating on Friday that it learned the Judge for Preliminary Investigations at the Court of Rome has ordered the dismissal of proceedings originating from investigations related to the financial statements as of June 30, 2022.

At the bottom of the mid-cap list were MAIRE and Carel Industries, each down 2.3%.

On the Small-Cap, Trevi Finanziaria Industriale saw a bullish push, rising 5.5%. On Friday, the company announced that Consob has approved Trevifin's prospectus for a rights issue of up to EUR100 million.

On the other side of the list, Softlab shed 4.3%, erasing Friday evening's 2.8% gain.

Dexelance - up 0.4% - announced on Friday the completion of its rights issue, which was fully subscribed for a total value of EUR49.9 million.

Among SMEs with the highest trading turnover, ICOP rose 5.7% while Fope gained 5.6%.

Selling hit H-Farm - down 1.9% - which on Friday defined the terms and schedule for the rights issue approved by the board of directors on May 29, for a maximum amount of EUR7.9 million.

RedFish LongTerm Capital - not yet traded - announced on Friday the reactivation of the share buyback program approved by the shareholders' meeting on July 25, 2025.

Among the laggards on the alternative list, Yakkyo fell 0.5% while Casta Diva Group shed 1.4%.

In New York on Friday evening, the Dow lost 1.4%, the Nasdaq retreated 4.2%, while the S&P 500 fell 2.6%.

In Asia, the Nikkei closed in the red by 3.9%, the Hang Seng fell 1.4%, while the Shanghai Composite ended 1.7% lower.

On the currency front, the euro changed hands at USD1.1524 from USD1.1534 on Friday evening, while the pound traded at USD1.3338 from USD1.3358 on Friday evening.

Among commodities, Brent traded at USD97.29 per barrel from USD93.43 per barrel on Friday evening, while gold was worth USD4,298.64 per ounce from USD4,340.09 per ounce at Friday's close.

Monday's macroeconomic calendar includes the Eurozone Sentix investor confidence index at 1030 CEST.

In the afternoon, at 1500 CEST, France will hold three BTF auctions with 3-month, 6-month, and 12-month maturities.

The day will conclude at 1730 CEST in the US with 3-month and 6-month Treasury Bill auctions.

No major corporate announcements are expected from Piazza Affari companies.

By Antonio Di Giorgio, Alliance News reporter

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