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Prospects for European markets are looking “very grim indeed,” one analyst told CNBC Monday, as the reality sinks in that Russia is likely to continue restricting its gas supply to the region.

“Investors will be very cautious going forward now,” Janet Mui, head of market analysis at U.K. wealth management firm Brewin Dolphin, told “Squawk Box Europe.”

“The very clear implication is that euro assets will be under pressure, and we saw that the euro has hit a new low versus the dollar.”

The flip side, she said, was that the dollar would be much stronger against both the euro and sterling. The dollar index, which measures the greenback against a basket of currencies, hit a fresh 20-year high Monday morning.

In turn, this could prove disinflationary for the U.S. economy, meaning the Federal Reserve does not need to be so aggressive in rate hikes going forward. She said the current market pricing of a Fed funds rate around 4% next year could be as high as it goes.

“A lot of bad news is already being priced in in the U.S. market, whereas in Europe it is probably not there yet,” Mui said.

— Jenni Reid

The Kremlin is rejecting blame for its halting of gas supplies to Europe via its Nord Stream 1 pipeline, pointing instead to Western-imposed sanctions that it says has made it impossible to acquire the parts needed to keep the pipeline infrastructure running.

Western sanctions were “causing chaos” to necessary maintenance work on the pipeline, Kremlin spokesman Dmitry Peskov said in a conference call with media, disagreeing with European leaders’ accusations that it was weaponizing its gas supplies.

Russian state gas provider Gazprom, which supplies the gas for the Nord Stream 1 pipeline connection to Russia and Germany, completely halted its supplies to Europe after detecting what it said was an oil leak.

— Natasha Turak

Here’s an update on how the pan-European Stoxx 600 is trading this morning:

European gas prices soared by around 30% on Monday after Russia said it would shut off gas flows to the continent via its Nord Stream 1 pipeline indefinitely, renewing fears of widespread gas shortages and rationing.

The front-month gas price at the Dutch TTF hub, a European benchmark for natural gas trading, was last seen at 281 euros per megawatt hour.

Shares of German utility Uniper plunged more than 11% in early trade as gas prices soared on the back of Russia’s halting of flows to Europe.

The company, Germany’s largest importer of gas, has already been forced to agree a 15 billion euro bailout with the German government due to the Russian supply squeeze.

The U.S. dollar index hit 110.086 in Asia’s morning trade, reaching a new two-decade high.

The Japanese yen weakened further to 140.3 after touching a 24-year low last week. The Korean won was at 1,370.87 against the greenback, a level not seen since April 2009.

Tech stocks have endured a difficult year so far, with some of the biggest names deep in the red.

But one cybersecurity firm has stood out for its relative resilience, and market veteran Nancy Tengler believes the stock is just getting started.

Tengler, who is CEO and chief investment officer of Laffer Tengler Investments, said her bullishness on the firm might be construed as a “controversial,” but argued that it is in fact a safer bet within the tech space.

Pro subscribers can read more here.

— Katrina Bishop

China’s Caixin Services Purchasing Managers’ Index for August came in at 55.0, compared with July’s print of 55.5.

The official non-manufacturing PMI for August is 52.6.

PMI readings are sequential and represent month-on-month expansion or contraction, where the 50-point mark means no change from the month before.

— Abigail Ng

With stock and bond valuations falling concurrently, investors should be looking to get out of “distorted markets,” according to Mohamed El-Erian, chief economic adviser to Allianz.

“There was a time when all asset prices went up — stocks and bonds — and we forgot about correlations. Why care about correlations when you’re being paid for holding both risk assets and risk mitigating assets? It’s a lovely world,” he told CNBC’s Steve Sedgwick Friday.

“”But the first half taught us, and what we have again learned since the middle of August, [is] that they can both go down at the same time.”

Investors seeking alternatives have a couple of options, El-Erian says.

CNBC Pro subscribers can read more here.

— Elliot Smith and Katrina Bishop

European stocks are expected to open cautiously higher on Wednesday with the U.K.’s FTSE index seen 18 points higher at 7,560, Germany’s DAX 33 points higher at 13,944, France’s CAC 40 up 18 points at 6,616 and Italy’s FTSE MIB up 42 points at 23,029, according to data from IG.

Data releases include preliminary euro zone unemployment data for the second quarter as well as second quarter gross domestic product. The latest U.K. inflation numbers for July will be released as well as preliminary second quarter Dutch GDP.

Earnings come from Uniper, Carlsberg, Persimmon, Balfour Beatty, BAT and National Grid.