Spain's Socialist Prime Minister Pedro Sánchez called a snap election for Nov. 29 on Monday after parliament rejected measures intended to quell public anger and mass protests over the country's housing crisis.

Sánchez garnered both fans and foes on the international stage after he emerged as Europe's most vocal critic of U.S. foreign policy in the Middle East earlier this year.

To some, his warning of "repeating the mistakes of the past" and refusal to be "complicit in something that is bad for the world" was an example of Europe standing up to a hawkish administration regardless of potential reprisal.

Others — not least U.S. President Donald Trump — slammed Sánchez and his administration, accusing Spain of putting "American lives at risk" and failing to pull its weight on NATO spending.

Trump threatened to cut off Spanish trade and diplomatic relations. Sánchez — also a fierce critic of Israel's war in Gaza — continued to take aim at the White House, saying of a now-defunct U.S.-Iran ceasefire that he would "not applaud those who set the world on fire just because they show up with a bucket."

But such geopolitical maneuvering is far from the agenda this month in Spain.

Public debate, as elsewhere in Europe, is increasingly defined by discontent over housing, wages and the cost of living. Immigration is also a growing political flashpoint, with the Spanish government still grappling with the aftermath of the arrival of tens of thousands of migrants into the North African enclave of Ceuta in July.

On headline figures alone, Spain's economy has bounced back strongly since the pandemic and continues to outpace the euro area average, with growth coming in at 0.7% in the second quarter this year. Tourism is booming, investor interest in its assets has been robust and the jobs market is strong.

Yet tens of thousands of people took to the streets over the weekend in a culmination of protests that have swept up all sides of the political spectrum, from left-wing housing campaigners who remain camped out in Madrid to far-right activists reported to have performed Nazi salutes.

Public discontent and calls for a general strike have mounted following the September eviction of an 87-year-old disabled woman from her home of 70 years. News of the dramatic event brought longstanding complaints about unaffordable rent increases and a lack of housing stock — especially in tourist hotspots — to a head.

'Opportunity' for Sánchez

Sánchez, leader of the Spanish Socialist Workers' Party, has served as prime minister since 2018.

He currently leads a fragile left-wing coalition formed in November 2023 reliant on numerous smaller, regional parties, which has made it difficult for him to pass reforms despite his reputation for political savvy. A parliamentary deadlock has left the country unable to pass a budget for more than three years.

Sánchez's popularity has been further dented this year by a probe into alleged misuse of funds by the Socialist Party and a corruption investigation into Sánchez's ally, former Prime Minister José Luis Rodríguez Zapatero. Zapatero denies wrongdoing.

In a bid to address the housing protests, Sánchez last week attempted to hurriedly pass measures to protect renters, including the suspension of evictions of vulnerable tenants until 2030, tax increases for apartments intended for tourist rents, a two-year extension on rental leases with expiry before 2028, and a restriction purchases of residential properties by investment firms.

The bills were voted down following opposition by parties including the center-right People's Party, the far-right Vox party, and pro-independence Together for Catalonia, further stoking public anger.

With a fresh parliamentary election required to be held before August 2027, analysts had been anticipating a vote would be called soon, Carsten Nickel, managing director of consultancy Consello, told CNBC's "Squawk Box Europe" on Monday.

"Clearly with this housing market related issue, [Sánchez] really sees this as an opportunity now — doesn't mean he's going to win it — but to rally the center-left vote on this typically center-left topic, and that's a better backdrop than say corruption allegations or regional election losses," Nickel said.

Polling by Politico puts the People's Party on top in a gauge of parliamentary voting intention, while analysts at Teneo said in a Friday note that polling suggested a right-wing bloc of the PP and Vox could together secure a parliamentary majority in an election.

"Over the past two months, public debate has increasingly focused on the migration crisis in Ceuta, Spain's North African enclave, and criticism of the government's handling of it... Housing is a major concern for voters and has the potential to mobilize the left-wing electorate," the Teneo analysts said.

"The strategy carries risks. After more than eight years in office, the government could itself be blamed for failing to address the housing crisis," they added.

Federico Santi, senior analyst for Europe at Eurasia Group, on Monday put a 70% probability of the election resulting in a center-right majority, citing the conservative opposition's solid polling lead, Sánchez's lackluster approval ratings and a fragmented left wing.

However, Santi also noted Sánchez's "long track record of turning around difficult elections," having been widely expected to lose in both 2019 and 2023, and his strong ability to mobilize voters around a rallying cry such as housing.

China, NATO key issues for new government

A new right-of-center government would raise numerous questions for market-watchers, Consello's Carsten Nickel told CNBC, including the status of NATO spending and what that would mean for its trade position with the U.S.

Another crucial question would be whether a new government would row back the current administration's advocacy within the EU for a less confrontational relationship with China on trade, Nickel continued, calling Spain the "last holdout pushing for a softer stance."

France and Germany are now aligned in feeling threatened by China's shift to becoming competitors rather than buyers in key sectors such as autos, and a move by Spain in the same direction could lead to a "dangerous situation of tit-for-tat, sector-by-sector" between China and the EU, he said.