FTSE 100 Falls as Defence Stocks Retreat, easyJet Soars on Takeover Speculation

The FTSE 100 started June on a weaker footing as investors weighed fresh geopolitical developments in the Middle East against rising oil prices and concerns about the outlook for interest rates.

The blue-chip index traded lower on Monday, underperforming several European peers as weakness in defence stocks and precious metals miners offset gains in energy shares and airlines.

Market sentiment remained cautious after reports that the United States and Iran exchanged messages over a potential agreement aimed at extending the current ceasefire and reopening the Strait of Hormuz. However, uncertainty remains high after Israel reportedly expanded military operations in Lebanon, raising concerns that regional tensions could continue disrupting global energy supplies.

Why Is the FTSE 100 Falling Today?

One of the biggest drags on the index came from defence stocks, which have been among the strongest performers this year.

Shares of BAE Systems fell more than 2%, while Babcock International and Rolls-Royce also moved lower as investors locked in profits following a strong rally driven by increased military spending and geopolitical tensions.

Gold miners were also under pressure as falling bullion prices weighed on sentiment.

Fresnillo and Endeavour Mining dropped nearly 3% after gold prices slid to their lowest level in two months. Investors continue to move away from precious metals as rising oil prices fuel inflation concerns and strengthen expectations that central banks may keep interest rates higher for longer.

Brent Crude Climbs Above $94

Oil prices remained one of the market’s biggest talking points. Brent crude rose above $94 per barrel after concerns persisted over shipping disruptions through the Strait of Hormuz, one of the world’s most important energy transit routes.

Before the conflict began earlier this year, roughly 3,000 vessels passed through the strait every month. Shipping activity has since fallen sharply, keeping energy markets on edge. Higher oil prices have created a difficult environment for equity markets because they increase inflation risks and could force central banks to maintain tighter monetary policy.

That prospect has pushed bond yields higher and increased pressure on sectors sensitive to borrowing costs.

EasyJet soars 10% on Takeover Interest

One of the standout performers on the FTSE 100 was easyJet. The airline surged more than 10% after reports suggested private equity firm Castlelake was considering a potential offer for the company.

easyJet later stated it had not received any proposal, but the speculation was enough to spark strong buying interest. Meanwhile, energy giants Shell and BP gained around 1% as rising crude prices boosted the outlook for oil producers.

UK House Prices Show Signs of Weakness

Investors also reacted to fresh housing market data.

Nationwide reported that UK house prices fell 0.6% in May, marking the largest monthly decline since June 2025 and significantly worse than economists had expected.

The figures suggest higher mortgage costs and elevated borrowing rates are beginning to weigh on housing demand after months of resilience.

FTSE 100 Outlook

The FTSE 100 remains caught between rising energy prices and concerns about economic growth. Investors will continue monitoring developments in the Middle East, oil prices, UK economic data, and interest-rate expectations for clues about the market’s next move.

For now, attention is likely to remain focused on whether higher inflation risks can outweigh the support provided by stronger commodity prices and resilient corporate earnings.