World stock markets displayed caution on Monday as concerns over escalating tensions in the Middle East offset optimism about imminent U.S. interest rate cuts. Oil prices surged over 1.5% due to worries about a potential disruption in oil supply stemming from the conflict between Israel and Hezbollah, both exchanging rocket fire and airstrikes on Sunday. Brent and U.S. crude prices spiked over $1, or 1.5%, with Brent trading at $80.35 a barrel, indicating unease among investors. Trading was subdued as the London market remained closed for a UK public holiday, with U.S. stock futures slightly up and European shares slightly down. The Nikkei stock index in Japan closed down nearly 0.7% as the yen strengthened. Federal Reserve chief Jerome Powell suggested at the Jackson Hole symposium on Friday that the central bank is preparing to ease policy, focusing on the labor market’s condition. European Central Bank chief economist Philip Lane struck a more cautious tone, mentioning progress in the euro zone’s inflation target but emphasizing that success is not guaranteed. German business morale declined for the third consecutive month in August, signaling a setback in the recovery prospects for Europe’s largest economy. In the bond markets, euro zone bond yields increased following Lane’s comments, while U.S. Treasury yields decreased. The market anticipates a quarter-point cut at the Fed’s Sept. 18 meeting, with further reductions priced in for the year. Nvidia’s upcoming earnings report is awaited, with high expectations keeping market attention on the stock’s performance. The company’s shares have surged 160% year-to-date and account for a substantial portion of the S&P 500’s gain this year. In currency markets, the dollar dropped to a three-week low against the yen, reflecting the anticipated rate cuts in the U.S. by year-end. Gold remained near its all-time peak at $2,524 an ounce, supported by a softer dollar and lower U.S. bond yields. Investors are eagerly awaiting U.S. personal consumption and core inflation data later in the week, along with a flash reading on European Union inflation, to gauge the possibility of rate cuts in September.