Europe midday: Shares extend losses on MEast tension, OECD outlook

(Sharecast News) - European shares extended losses at midday as another breakout of hostilities between the US and Iran and gloomy global growth forecasts from the OECD hit investor sentiment.

The pan-regional Stoxx 600 index was down 0.47% to 622 at 1155 BST with all major bourses lower.

In the Gulf, tensions increased after US forces fired a Hellfire missile to disable a tanker attempting to break through the American blockade of the Strait of Hormuz on Tuesday and later said they attacked sites on Iran's Qeshm Island.

Iranian drones hit Kuwait's international airport, causing "significant" building damage and injuries to a number of people, according to officials. Air traffic was suspended on Wednesday morning.

Brent crude jumped to almost $99 a barrel as hopes of any sort of peace deal between the US and Iran diminished.

"Stock indices in Europe are buckling under the news that fresh Iranian strikes have hit parts of the Gulf, as hostilities flare in the region once more. It is unclear if talks to end the war and reopen the Strait are ongoing, but the latest developments suggest that investors may have been too quick to price in the impact from last week's promised Memorandum of Understanding between Iran and the US," said XTB research director Kathleen Brooks.

"As we enter the start of the fourth month of the conflict, there are clear signs that the energy price spike is becoming embedded in the global economy ... a rate hike from the ECB is now almost a certainty. The interest rate futures market is currently pricing in a 96% chance of a hike from the ECB on 11th June."

Investors were also spooked by the OECD cutting its global growth outlook for 2026 to 2.8% from 3.4% last year and a warning that a prolonged closure of the Strait of Hormuz could cut growth to 2.1% this year and 1.8% in 2027.

In economic news, private sector activity across the eurozone contracted less than expected in May, according to revised figures from S&P Global on Wednesday, though still pointed to a steeper downturn than the previous month as inflation pressures picked up.

The final estimate of the S&P Global eurozone composite purchasing managers' index - a weighted average of the manufacturing PMI output index and the services PMI business activity index - came in at 48.5 for last month.

That's up from the preliminary reading of 47.5 published two weeks ago but down from April's 48.8 level, marking the lowest figure in 18 months.

On the equities front, equity news, shares in retailers B&M and Inditex both jumped after results.

Howden Joinery also gained after it agreed to buy DIY Kitchens for �390m.

Reporting by Frank Prenesti for Sharecast.com