LONDON, Oct 16 Reuters European stock indexes fell on Monday but oil prices pulled back on recent gains, as cautious markets watched for signs of escalation which could determine the financial fallout from the IsraelHamas war.

Israel39;s Prime Minister Benjamin Netanyahu vowed on Sunday to demolish Hamas as his troops prepared to move into the Gaza Strip in pursuit of Hamas militants whose deadly rampage on Oct. 7 killed 1,300 people in the worst attack on civilians in Israel39;s history.

Oil prices rose last week as investors priced in the chance of escalation in the world39;s top oilproducing region, while U.S. Treasuries and gold prices rose as traders bought safehaven assets.

Traders are waiting to see if the conflict draws in other countries, which would drive up oil prices further and deal a fresh blow to the global economy. They are keeping a particular eye on Iran, which said on Sunday that its armed forces would not engage militarily with Israel so long as Israel does not attack it, its interests or its citizens.

At 0823 GMT, the MSCI World Equity Index was down 0.2 on the day. Europe39;s stock indexes were in the red, with the STOXX 600 down 0.2 and London39;s FTSE 100 down 0.1.

Oil prices eased after surging last week. Brent futures were last down 59 cents, or 0.65, at 90.3 per barrel. U.S. West Texas Intermediate WTI crude fell 0.7 or 59 cents to 87.06 a barrel.

What the market will be looking for in order for the mood to improve would be any sort of…