Europe close: Stocks fall after fresh Middle East escalations
By Josh White
Date: Monday 01 Jun 2026
(Sharecast News) - European shares closed lower on Monday after the US struck targets in Iran over the weekend and Kuwait came under attack, raising concerns over a fresh escalation in the Middle East.
The pan-European Stoxx 600 fell 0.89% to 620.43.
Germany's DAX declined 0.44% to 24,994.13, France's CAC 40 lost 0.45% to 8,146.59, and London's FTSE 100 dropped 0.68% to 10,338.95.
Dan Coatsworth, head of markets at AJ Bell, said: "It's Groundhog Day for the markets as the Iran-US ceasefire is tested, while conflicting noises are made about the prospects for a peace deal."
"Understandably, markets are in a non-committal mood as they wait to see if this is the week when we finally see some form of resolution to the crisis," he added.
"The FTSE 100 slipped, while oil prices ticked higher but remain some way off the $100 per barrel alarm-bell territory."
US Central Command said its strikes were carried out in "self defence" against "aggressive Iranian actions", including the shooting down of a US drone that it said was operating over international waters.
The strikes hit Iranian radar and command-and-control sites for drones in Goruk and on Qeshm Island.
Iran's Islamic Revolutionary Guard Corps said it had targeted a US-used airbase in response to the attack on southern Iran, without identifying the base.
Kuwait's state news agency KUNA reported that air defences were intercepting missile and drone attacks as sirens sounded across the country.
Neil Wilson, UK investor strategist at Saxo, said European markets opened mixed and oil rose after the US and Iran exchanged strikes over the weekend, "cooling hopes for an imminent lasting peace deal".
He said Brent crude futures rose around 3% to touch $94, adding: "Anything under $100 is pricing a good outcome."
Investors were also watching developments in Lebanon, where Israel continued to annex more territory as its moves against Iran and influence over Washington's campaign appeared to falter.
European leaders condemned the widening incursion after Israeli troops captured the medieval Beaufort castle, with French president Emmanuel Macron saying there was no justification for the escalation.
Coatsworth said government bond yields had edged higher, adding that they were "another key barometer of the temperature of the conflict given the impact of the energy price shock on inflation and interest rate expectations".
"On the flipside, after the record highs posted last week, US futures are pointing to a higher open when trading resumes on Wall Street today," he said.
German retail sales fall in April
On the economic front, German retail sales fell 0.3% month-on-month in April, a smaller decline than the 0.5% expected, despite a sharp drop in petrol station sales caused by the spike in fuel prices following the Iran war.
Destatis said gas station sales fell 4.0% in real terms and 1.0% in nominal terms compared with March.
Compared with April 2025, real sales at gas stations were down 10.4%, while nominal sales rose 7.6%.
In the UK, manufacturing grew at the fastest pace in four years.
The S&P Global manufacturing PMI rose to 53.9 in May from 53.7 in April, remaining above the 50 mark for a seventh consecutive month.
All five sub-components were at levels consistent with improving conditions for the first time since May 2022, while output rose for a second month, led by intermediate and investment goods.
However, S&P Global warned that the acceleration could prove short-lived, with some firms reporting that customers were front-loading purchases to protect against expected price rises and supply-chain disruption.
Rob Dobson, director at S&P Global Market Intelligence, said the upturn remained vulnerable because it was heavily reliant on stockbuilding linked to war-related costs and supply risks.
He added that cost inflation had risen to a near four-year high, while longer lead times and material shortages continued to constrain manufacturers.
UK house prices meanwhile fell for the first time this year in May, according to Nationwide.
Annual growth slowed to 1.7% from 3.0% in April, while prices fell 0.6% month-on-month, compared with expectations for a 0.1% decline.
The average house price stood at £278,024.
Robert Gardner, Nationwide's chief economist, said some loss of momentum was to be expected given the uncertainty caused by the Middle East conflict, higher energy prices and rising market rates.
He said the housing market had remained resilient, but economic growth was likely to be weaker and inflation higher than previously expected this year.
China's factory activity also slowed in May.
The official manufacturing PMI fell to 50.0 from 50.3 in April, its lowest reading for three months and in line with expectations.
New orders slipped into contraction at 49.9, while new export orders fell to 48.6.
Output growth slowed to 51.2, and input cost inflation moderated but remained elevated at 60.5.
Lynn Song, chief economist for Greater China at ING, said the mixed data suggested the economy was "muddling through", with high-tech activity helping to offset weakness in traditional sectors such as cement and steel.
easyJet jumps on 'opportunistic' bad, Wise in the red
In equity markets, easyJet jumped after confirming that private credit firm Castlelake had made what the airline described as a "highly opportunistic" takeover bid.
Castlelake said on Friday it was in the early stages of considering a possible offer but had not approached easyJet's board.
Coatsworth said easyJet's largest shareholders were unlikely to accept an offer unless the price was compelling.
"Castlelake is preying on the weak, pouncing when EasyJet faces its biggest headwind since the global pandemic," he said.
"Investors won't want to sell in the darkest of hours unless they are getting generous compensation."
Coatsworth said a bid was "the last thing EasyJet's management want to happen", given the weak market backdrop and concerns around post-summer fuel shortages.
"The fact the shares have 'only' jumped 12% on Castlelake disclosing takeover interest implies the market doesn't believe a bid will succeed," he added.
"There is logic to Castlelake being interested in the business, given it has a history of investments linked to the aviation sector."
Wise tumbled 15% after the Bureau of Investigative Journalism reported that prosecutors in Belgium had opened investigations into the digital money transfer platform over suspicious transactions worth €500m.
Reporting by Josh White for Sharecast.com.
Email this article to a friend
or share it with one of these popular networks:
You are here: news
10 Lower Thames St,
London EC3R 6EN