FTSE indexes fall as rising conflict costs offset takeover-driven gains

The UK's main stock indexes started June on a weaker footing on Monday as investors assessed the economic impact of the ongoing Middle East conflict.

Gains in several merger and acquisition-related stocks helped limit broader market losses.

The blue-chip FTSE 100 fell 0.16% by 1017 GMT, while the mid-cap FTSE 250 slipped 0.11%.

Both indexes had closed May with their second consecutive month of gains.

Takeover developments lift selected stocks

Shares of EasyJet rose nearly 10% after US investment firm Castlelake said it was considering a potential takeover offer for the British budget airline.

The prospect of a possible acquisition made EasyJet one of the strongest performers on the FTSE 250 during the session.

Bluefield Solar Income Fund also posted significant gains.

The renewable energy-focused investment company surged 15.9% after power group Drax agreed to acquire the company in a deal valued at approximately £561 million ($755.3 million).

Drax shares advanced 1.8% following the announcement.

Bluefield Solar and EasyJet emerged as the top gainers on the FTSE 250 index, providing support to the broader market despite overall weakness.

Energy stocks track higher oil prices

Energy shares moved higher as oil prices increased amid escalating geopolitical tensions in the Middle East.

BP and Shell each gained around 1%, benefiting from stronger crude prices.

Oil markets reacted after Iran and the United States exchanged strikes, while Israel ordered troops to move further into Lebanon as fighting continued against Tehran-backed Hezbollah.

The rise in energy prices added to concerns about the wider economic effects of the conflict, particularly on inflation and business costs.

Manufacturing costs accelerate

Fresh survey data pointed to mounting pressure on British manufacturers.

According to the survey, manufacturers raised prices at the fastest pace since June 2022.

The increase was driven by a sharp rise in costs linked to supply chain disruptions caused by the Iran war.

The findings are likely to attract the attention of the Bank of England, which is monitoring inflationary pressures across the economy.

The central bank is closely watching how higher energy prices resulting from the closure of the Strait of Hormuz affect businesses and consumers.

Policymakers are also assessing whether these increased costs spread more broadly through the economy.

For now, the Bank of England has kept interest rates unchanged.

ME Group slumps after profit warning

ME Group International was among the day's biggest losers.

The instant-service equipment company plunged 27%, falling to its lowest level in more than three years.

The decline came after the company lowered its forecast for full-year 2026 profit before tax.

ME Group said changes in consumer spending patterns linked to the Middle East conflict negatively affected revenue during April, prompting the downgrade.

Wise falls on the investigation report

Shares of money transfer company Wise dropped 13% in London trading.

The decline followed a report by the Bureau of Investigative Journalism stating that Belgian prosecutors are investigating the company over €500 million ($582.5 million) worth of suspicious transactions.

The report added further pressure to a market already focused on geopolitical risks and the economic consequences of the conflict in the Middle East.

Overall, takeover activity provided pockets of strength across UK equities, but concerns over supply chain disruption, rising costs, and escalating geopolitical tensions weighed on broader investor sentiment as trading began in June.