Europe close: Stocks slip amid Middle East tensions

(Sharecast News) - European stock markets fell on Thursday as oil prices continued to rise on the back of rising geopolitical tensions in the Middle East, while investors digested a trio of central bank meetings.

"Ongoing Israel-Iran missile attacks and the possibility of US involvement have increased worries of possible supply disruptions which pushed oil and gas prices to 4-month highs," said Axel Rudolph, Senior Technical Analyst at IG.

Reports out overnight were that the US military was making preparations for a possible - but as yet undecided - strike on Iran.

UK and EU foreign ministers were due to meet with their Iranian counterpart the next day in an 11th hour bid to avoid an escalation.

The Stoxx 600 was down 0.3% at 538.56 with all major indices across the continent in the red. The pan-European benchmark has now fallen in eight of the past nine sessions, dropping around 2.7% since 6 June.

After an initial surge past $78 a barrel on Friday, followed by a sharp drop on Monday, Brent crude has been creeping back higher over the past few sessions and stood above $78 by the end of trading on Thursday. This represents a 20% jump over the past month, closing in on levels not seen since January.

Norges Bank surprises with cut

The Bank of England stood pat on interest rates and the Swiss National Bank lowered them by 25 basis points to 0.0%, both as expected.

Norway's monetary authority however also cut rates by 25bp- unexpectedly so.

In other economic news, construction output across the eurozone rose at its fastest rate in more than two years in April, according to data out on Thursday from Eurostat. Construction output rose by 1.7% during the month of April, rebounding strongly after a 0.2% decline in March and a 0.6% drop in February.

Market movers

Banking stocks were mostly weaker as geopolitical uncertainty clouds the economic outlook, with Societe Generale, BNP Paribas, HSBC, Barclays and UBS all trading lower. However, German lenders Deutsche Bank and Commerzbank were bucking the trend to edge higher.

In London, Revolution Beauty was a heavy faller, after retail conglomerate Frasers Group officially walked away from the bidding process for the online cosmetics retailer, causing shares to drop 35%. Frasers had announced last week that it was conducting due diligence in regards to a possible offer. Frasers shares gained less than 1%.

Dutch recruiter Randstad and Swiss-French peer Adecco were at the bottom of the pile on the Stoxx 600 on negative readacross from smaller industry player Hays after the British firm delivered a profit warning.