Europe’s main share and currency markets started the week modestly higher while oil and bond prices dipped, as investors kept Middle East concerns in check after Iran’s weekend attacks on Israel, Reuters reports.

Oil prices, which have risen 10 per cent as the tensions have built up over the last month, dropped 1pc, Israel’s shekel rose 1pc and the pan-European STOXX 600 climbed 0.3pc, albeit led by defence stocks.

Close Brothers Asset Management’s Chief Investment Officer Robert Alster said the hope was that US and Gulf diplomatic efforts would now prevent further serious escalation of the Middle East troubles.

“There is a general belief (among investors) that it isn’t going to escalate,” Alster said, highlighting that oil prices hadn’t breached their September highs of $96 a barrel.

Oil prices showed traders had largely priced in a retaliatory attack from Iran, which could lead to more strictly enforced sanctions on Iranian oil. That saw Brent crude futures peaking at $92.18 a barrel last week, the highest level since October.

Monday’s 1pc drop left Brent back below $90 per barrel, US West Texas Intermediate crude futures at just under $85 a barrel while gold was a touch higher at $2,351 an ounce.