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BERLIN -- Having withstood a wobbly euro and slumping global technology shares, Europe's equity markets are likely to again be placed on shaky footing next week amid the rising tension in the Middle East.

Although the clashes between Israelis and Palestinians sent a jolt through stock markets the world over last week, should the troubles continue to widen in scope in the coming week, the effects for Europe's bourses could be especially dire.

That's because the euro is also exacerbating things. It has begun to dip back to preintervention levels as investors flock to the U.S. dollar as a safe haven during times of strife. Late Friday, the euro was trading lower at $0.8620.

Already surging crude oil prices have raised the specter of importing inflation as dollar-denominated energy products become more expensive. That could force the

European Central Bank

to raise interest rates, which in turn could choke off growth in the eurozone. The ECB unexpectedly increased its main refinancing rate two weeks ago by a quarter of a percentage point to 4.75%.

Consequently, many investors are likely to remain on the sidelines next week as the Mideast conflict continues to simmer, even if some observers are beginning to think the recent tumble in share prices across Europe presents new bargain-hunting opportunities.

"I'd start looking around at these levels -- without the crisis in the Middle East we'd be seeing much better prices," says Matthias Joerss, an equity strategist for

BHF Bank

in Frankfurt. Joerss adds a note of caution for investors brave enough to dive in, however: "You've got to be aware that everything could still crash at this point."

For those with the required level of intestinal fortitude, shares of beleaguered technology, media and telecom -- or TMT -- companies such as telecom equipment-maker



and chipmaker



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may be as cheap as they are going to get for quite a while.


Neuer Markt

, Frankfurt's answer to the


and one of Europe's leading technology indices, got hammered last week, touching its lowest level of the year.

On Friday, the Neuer Markt's

Nemax 50

closed up 143.6, or 3.4%, to 4362.8, but that's still around half the highs the index set back in March.

Notwithstanding that precipitous drop, some observers remain sanguine: "The correction we are now having is very healthy, but we still probably have to find the bottom," says Henning Gebhardt, a strategist for Frankfurt-based mutual funds group


. "The longer-term prospects remain pretty good."

Despite black clouds over the markets, stemming from uncertainty surrounding the events in the Middle East, investors will also get a chance to focus on individual issues next week, as some regional heavyweights report third-quarter earnings.

Dutch electronics giant


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will present results on Tuesday, and German software juggernaut


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reports on Thursday.

On Thursday we will also see the release of a much-watched survey of German business sentiment in September by the Munich-based


economic institute. Since Germany makes up over a third of eurozone output, the survey could influence the euro and give investors a better idea of which way interest rates -- and by extrapolation, equity markets -- may be headed.