LONDON — World stock markets were subdued on Monday as the turmoil in Iraq dampened sentiment and investors held back ahead of the Federal Reserve's monthly policy meeting later in the week.
Oil prices hovered at a nine-month high as fears grew that the violence in Iraq could escalate into a broader regional conflict, unsettling global financial markets.
Iraq's prime minister vowed on Sunday to "liberate every inch" of territory captured by the Islamic militants who posted photos that appeared to show their gunmen massacring scores of captured Iraqi soldiers.
"Reports that Iraq has entered a full blown sectarian conflict is ensuring a thread of anxiety is running through markets," analysts at Rabobank wrote in a research note.
Adding to uncertainty was Russia's decision to halt gas supplies to Ukraine after the sides were unable to agree on a new price for deliveries. Though the move does not affect supplies to the rest of Europe and Ukraine has reserves to last months, it raises the stakes in the countries' standoff.
In Europe, France's CAC 40 fell 0.7 percent to close at 4,511.34 while Germany's DAX shed 0.2 percent to 9,898.29. The FTSE 100 index of leading British companies slipped 0.2 percent to 6,761.87.
On Wall Street, the Dow was down 0.1 percent to 16,762.28 and the S&P 500 was flat 0.2 percent to 1,936.11.
Investors were also preparing for the regular meeting of the Federal Reserve Board's policy setting Open Market Committee, scheduled for midweek. While policymakers are widely expected to announce that the Fed will cut its bond-purchase program by another $10 billion, investors will be examining their comments on the outlook for raising interest rates, economic growth and inflation.
"The FOMC statement in the early hours of Thursday morning is undoubtedly the primary focus for all global markets this week," said Niall King, a sales trader at CMC Markets in Sydney.
In Asia, most benchmarks were lackluster but stocks in the region's two biggest economies moved strongly — in opposite directions.
Japan's benchmark Nikkei 225 sank 1.1 percent to close at 14,933.29 as the yen strengthened 0.2 percent to 101.86 against the dollar. A stronger yen means the cars and electronics produced by Japan's export giants are more costly when sold overseas.
In mainland China, the Shanghai Composite Index rose 0.7 percent to end at 2,085.98 after Chinese Premier Li Keqiang, writing in The Times newspaper ahead of a visit to Britain, said that he expects the world's No. 2 economy to grow "around 7.5 percent this year," in line with the government's target.
Hinting that the government is prepared to roll out more mini-stimulus measures, Li said, "Despite considerable downward pressure, China's economy is moving on a steady course. We will continue to make anticipatory and moderate adjustments when necessary."
South Korea's Kospi edged 0.1 percent higher while Hong Kong's Hang Seng slipped less than 0.1 percent and Australia's S&P/ASX 200 rose 0.1 percent.
In energy trading, benchmark crude oil for July delivery rose 3 cents to $106.95 in electronic trading on the New York Mercantile Exchange. The contract rose 38 cents on Friday.
The euro rose 0.2 percent to $1.3568.
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