A look at the day ahead in European and global markets from Ankur Banerjee

The halt to the latest tit-for-tat attacks in the Middle East spurred a twitchy reaction in markets as lingering unease over stretched tech valuations and the prospect of higher-for-longer rates compounded doubts about a ceasefire that has struggled to hold.

Oil prices, which have given up nearly all their gains since the U.S.-Iran war flared in late February, bounced on renewed hostilities but softened as prospects for fresh talks raised hopes of salvaging an interim deal.

That helped lift U.S. and European stock futures, though Asian equities remained under pressure as investors fret over stretched tech valuations and the drag from a stronger dollar.

Doubts that the AI-driven surge powering global stocks to record highs is running out of steam have hit sentiment, as investors question whether massive spending on AI infrastructure will pay off.

While Micron's strong earnings forecast last week pointed to insatiable demand for memory chips, Apple's price hikes underscored the challenges facing firms as they pass on the rising costs of chips on to customers.

The dollar remained perched near a one-year high, casting a shadow on most other currencies but none more so than the Japanese yen, which was at 161.78 per dollar. The only thing keeping the fragile yen from breaking beyond 40-year lows of 161.96 is the prospect of another round of intervention.

Japanese authorities stepped into the market to stem the yen's decline in late April-early May but as in previous episodes in 2022 and 2024, the intervention has failed to change the yen's trajectory.

And with markets betting on a Federal Reserve rate hike this year, the yen will need a drastic step from the Bank of Japan to stage any real comeback.

Key developments that could influence markets on Monday:

Economic events: Euro zone sentiment surveys for June