London's FTSE 100 edged lower on Monday, with a sharp rise in oil prices triggered by escalating Middle East conflict overshadowing takeover interest in budget airline EasyJet. The blue-chip index slipped 0.20% to 10,388.72, while the domestically-focused FTSE 250 also traded in the red, according to market data.
The decline comes after both indexes posted a second consecutive month of gains in May, but renewed geopolitical tensions have dampened investor sentiment. Brent crude futures jumped over 3% to $93.80 a barrel as the United States and Iran exchanged strikes and Israel expanded its military operations into Lebanon, raising energy costs for airlines, retailers, and manufacturers.
EasyJet shares surged after U.S. investment firm Castlelake revealed it was in the early stages of considering a possible takeover offer. However, Castlelake emphasized that no formal approach had been made and there was no certainty of a bid. The company has until 5 p.m. on June 26 to make a firm offer or walk away under UK takeover rules.
EasyJet's board pushed back hard, describing the timing as "highly opportunistic" given that the airline's share price has been depressed by Middle East tensions, weaker consumer confidence, and higher jet fuel costs. The board stated it had held no discussions with Castlelake and would evaluate any proposal against valuation and the likelihood of completion. Barclays analyst Andrew Lobbenberg noted that any deal would need to navigate ownership and control rules, a sensitive issue in the airline industry where cross-border acquisitions can face traffic-rights and licensing hurdles.
In other deal news, Bluefield Solar Income Fund surged after Drax agreed to acquire the renewable energy investor in a transaction valuing it at approximately £561 million, including a permitted dividend. Bluefield shareholders will receive 92.574 pence per share in cash plus a 2.25 pence interim dividend, representing a 31% premium to the pre-offer closing price.
Not all corporate news was positive. ME Group International tumbled after the vending and self-service equipment group reported softer April revenue, particularly in its French photobooth and laundry operations, and cut its 2026 pretax profit forecast to £69 million-£74 million. Meanwhile, Wise fell sharply following reports that the payments group is facing a Belgian investigation into potential anti-money laundering failures linked to transactions worth around €500 million. Wise said the Brussels prosecutor's inquiries were incomplete and no specific findings had been shared.
On the macro front, the S&P Global UK manufacturing purchasing managers' index rose to 53.9 in May, its highest level since May 2022, signaling expansion. However, the data also showed manufacturers raised prices at the fastest pace since June 2022, reigniting concerns about inflationary pressures. Rob Dobson, director at S&P Global Market Intelligence, warned that the factory bounce could fade once customers finish building safety stocks, suggesting some orders reflect precautionary buying rather than durable demand.
The risk, analysts cautioned, is that markets are overly reliant on a quick diplomatic resolution to the Middle East crisis. Kathleen Brooks, research director at XTB, noted that investors are still banking on a US-Iran deal and the reopening of the Strait of Hormuz, but any delays could hit sentiment. A prolonged disruption would keep pressure on oil prices, corporate margins, and Bank of England interest rate expectations, potentially complicating the outlook for UK equities.
