MARKET WRAPS

Stocks:

European shares were mixed Monday amid a deadlock in U.S.-Iran talks to reopen the Strait of Hormuz.

"Hopes of a deal between U.S. and Iran are fading as U.S. is set to announce measures for Iran's economic isolation this week," Jefferies said.

The 60-day memorandum of understanding between the U.S. and Iran expires on Monday.

Oil prices were mixed, but remained supported by renewed fighting in Lebanon and attacks on vessels in the Strait of Hormuz, which are raising concerns over regional supply disruptions and complicating prospects for a U.S.-Iran deal, ING said.

Looking ahead, flash purchasing managers data for August from France, Germany and the eurozone on Friday will be the highlight of an otherwise light week for economic data.

Investec INL anticipates a fall in the composite eurozone index "as the continued stalemate between the U.S. and Iran over the Strait of Hormuz has sent oil and gas prices higher again."

In the U.K., labor market figures are set to be released Tuesday and inflation data on Wednesday. The data will be watched for clues on the prospects of the Bank of England raising interest rates in 2026.

U.S. Markets:

Stock futures were mostly up to start the week as investors pondered the Federal Reserve's next move.

Minutes to the Fed's meeting in July are due on Wednesday and could give clues as to whether interest rates might rise in September.

Attention will also turn to results from large U.S. retailers this week, which will indicate the impact of recent turbulence on U.S. consumer sentiment.

Forex:

The euro rose to a two-month high against the dollar, driven by a favorable shift in interest-rate expectations. The dollar fell to a 10-day low against a basket of currencies as expectations for the Fed to raise interest rates this year dim.

Bonds:

Eurozone government bond yields were stable even as Treasury yields fell, as high energy prices remain a key factor in Europe with no progress in the Middle East.

Bund yields were back at the upper end of their recent trading range, as the Iran ceasefire looks set to expire, Commerzbank said.

Treasury yields declined across maturities, though stay at elevated levels, as Brent oil is largely stable, while market expectations of Federal Reserve interest-rate hikes are weakening.

For Treasurys, Morgan Stanley is betting on a seven- to 30-year steepener and it also sees the historically stronger half of August still to come.

Given the recent rise in long-end bond yields in major markets, including the U.S., Japan and the U.K., Bank of America said it does not see any single driver. "There is not a single driver to point to, but excessively loose fiscal policy is generally a common factor." Energy:

The lack of progress in reaching a peace deal in Iran has put oil traders in a wait-and-see mode. Front-month West Texas Intermediate crude oil futures were last 0.8% lower and front-month Brent crude oil futures were 0.1% lower.

Metals:

Gold rose as investors pare back bets of an imminent interest-rate hike. The precious metal continued a two-week advance after weaker U.S. retails sales and softer consumer sentiment weighed on the dollar and reduced expectations of a rate hike, MUFG said.

Gold chart

Comex gold futures' bullish setup was still intact, based on the daily chart, RHB Retail Research said. The commodity's fresh bullish candlestick pattern posted on Friday suggests selling pressure has tapered.

Copper

Copper continued to rally as supply concerns mount. In the morning trade, 3-month LME prices were 0.7% higher. The rise comes as LME inventories fell for a 42nd consecutive session to 204,975 tons, which is their lowest level since February, ING said.

Iron ore

Iron ore futures declined in early trade. The broader demand backdrop for the ferrous metal remained weak, said ANZ Research, citing factors such as softer domestic consumption in China and elevated inventories.

EMEA HEADLINES

Iran's Secret Plan to Escalate the War

After President Trump signed a memorandum of understanding with Iran in mid-June, administration officials fanned out to build support for an agreement they hoped would reopen the Strait of Hormuz and start winding down the war.

Iran's hard-line leaders huddled in Tehran and came up with a different plan, according to Iranian and Arab officials. In their view the pact was likely just an attempt by the U.S. and Israel to take pressure off the global economy and buy time for a bigger attack down the road. Instead of putting faith in talks, they took the past two months to prepare for a bigger fight.

AstraZeneca Ends Phase Three Lung Cancer Drug Trial After Review

AstraZeneca said it is ending the Phase 3 trial of volrustomig plus chemotherapy for metastatic non-small-cell lung cancer.

The Cambridge-based pharmaceutical company said Monday that the decision is based on the recommendation of the Independent Data Monitoring Committee after a planned review of trial data.

Iran Says Pilots Missing After a Brazen Bombing Run Are Prisoners in Qatar

Iran accused Qatar of holding three of its air force pilots prisoner, deepening a mystery that dates back to the beginning of the war.

Just three days into the conflict, Qatar said it had shot down a pair of Iranian Sukhoi Su-24 warplanes that were threatening its airspace.

Iran War Commander Visits the USS Abraham Lincoln

The U.S. admiral overseeing the war with Iran visited the USS Abraham Lincoln on Saturday as the aircraft carrier prepares to return home following an extended wartime deployment, according to U.S. Central Command.

The visit by Centcom commander Adm. Brad Cooper capped a 10-day trip that also included visits to Bahrain, Iraq, Israel, Jordan, Saudi Arabia, and the United Arab Emirates, the command said. The stop on the Lincoln comes amid reports of poor living conditions and some crew members struggling with their mental health following a nine-month deployment without port visits.

GLOBAL NEWS

China's Economic Activity Weakened in July

China's economic activity cooled in July after the economy posted its weakest quarterly growth in more than three years in the second quarter, as surging exports fueled by the artificial-intelligence boom failed to offset weakness in domestic demand.

Industrial production rose 4.5% from a year earlier in July, slowing from the 5.3% increase for June, the National Bureau of Statistics said Monday. Economists surveyed by The Wall Street Journal had anticipated industrial production to grow 4.8% last month.

Growing Rate-Hike Bets Push 10-Year JGB Yield to Three-Decade High

TOKYO-Growing bets on an imminent rate hike sent the benchmark 10-year Japanese government bond yield to a fresh three-decade high on Monday, extending a rise driven by concerns over the nation's fiscal health.

The 10-year JGB yield touched 2.930%, the highest level since September 1996. The policy-sensitive two-year yield also jumped 4.0 basis points to 1.690%, while the five-year yield reached as high as 2.170%.

Earnings Are Crushing It. Stocks Are Riding High. Why Isn't Wall Street Moving on S&P 500 Price Targets?

Wall Street is heading into the final stretch of the second-quarter earnings season riding the strongest pace of profit growth in five years-alongside fading bets on a Federal Reserve interest-rate hike, which should support stock performance deep into the autumn.

The market's most-watched analysts, however, are still forecasting end-of-year price targets for the S&P 500 that suggest meager gains over the coming months-even as they predict impressive profit growth over the coming quarters, without fretting too much about the amount investors will pay for it.

Rural Economic Pain Tests the GOP's Grip on a Trump Stronghold

DES MOINES, Iowa-The arrival of late-summer state fairs, like the one here that features a prizewinning boar weighing 1,246 pounds, signals to the political world that the midterm campaign's final chapter is just ahead.

As Iowa's 11-day extravaganza started late last week, the state's Republicans found themselves in an unfamiliar position: trailing Democrats in a top race and facing serious challenges in several others.

Trump Orders Cuts to U.S.-South Korea Military Drills

WASHINGTON-President Trump said Sunday he would "substantially reduce" joint military exercises with South Korea, touting his "very good relationship" with North Korean leader Kim Jong Un.

Trump's social-media post comes as the U.S. and South Korea are scheduled to begin an 11-day exercise, dubbed Ulchi Freedom Shield, to strengthen the two countries' ability to defend against a potential North Korean attack.

Historic Floods Hit Indiana, Where Death Toll Rises to at Least Six

At least six people have died in Indiana as a series of relentless storms led to historic flooding in the Midwestern state.

Heavy rain over several days caused significant flooding along the White River, which flows through Indianapolis and central and southern Indiana. Early Saturday, the river crested at nearly 25 feet in central Indiana-surpassing a record set in 1913, according to the National Water Prediction Service.

Write to priscila.barrera@wsj.com