The escalation of geopolitical tensions in the Middle East does not seem to particularly spook markets at the moment even if investors remain very cautious and refrain from taking positions as they await new developments.

According to one trader, after yesterday's downward reaction, markets, already vaccinated on geopolitical risks, are leaning toward a normalization of the situation although attitudes could change quickly depending on Israel's countermove to yesterday's missile attack by Iran.

Against this backdrop, investor interest is focused on oil stocks in the wake of rising crude oil prices, and on the defense sector as war fronts widen.

Also uncertain between bid and ask are the other European stock markets, while on Wall Street U.S. futures are trading below parity, a sign of a market that, in a fluid situation, is keeping its guard up.

On the macro front, today's focus will be on the U.S. private sector employment Adp data, which, although not as particularly relevant as the nonfarm payrolls on Friday's agenda, could still have its impact on the market if it turns out to be far from expectations.

Around 12.25 p.m. the Ftse Mib index, is down slightly by 0.2 percent. Volumes around the billion mark.

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Leading the Ftse Mib Leonardo rises 4% amid a European defense sector backdrop well bought on military escalation in the Middle East. New war fronts put the stock back in the spotlight after selling in recent weeks on the standoff in Ukraine, notes a trader.

Among oils, Eni rises 2.5 percent, Saipem 1.2 percent, and Tenaris 1.3 percent with the European Stoxx energy index gaining as much as 2.4 percent pointing to its best session in more than two months.

Positive cues also in luxury, with Cucinelli up 0.8% and Moncler up 0.7%. Banks and utilities were weak.

At the bottom of the Ftse Mib Pirelli loses more than 4 percent, after Brembo's exit from the capital eliminated speculative appeal on a merger between the two companies.

In contrast, the news, removing the market's perceived risk of a merger with Pirelli, is positive for Brembo, which gains more than 3 percent. According to Equita, moreover, the sale of its entire stake in Pirelli "eliminates an investment that was never clearly explained," while thanks to the proceeds of the sale the brake group can further increase "firepower for investments well over a billion."

(Andrea Mandalà, editing Claudia Cristoferi)