European stocks slide on spreading Iraq unrest

European stock markets fell sharply on Friday, with airlines hit hard by higher oil prices caused by spreading unrest in Iraq.
London's FTSE 100 index of top companies sank 1.04 percent to stand at 6,771.60 points in late morning deals, weighed down also after Bank of England governor Mark Carney hinted at a rate hike sooner than expected.
Elsewhere, Frankfurt's DAX 30 sank 0.95 percent to 9,845.62 points and in Paris the CAC 40 index dipped 0.90 percent to 4,513.49 compared with Thursday's closing levels.
Brent oil soared to a nine-month high at $114.69 a barrel, as traders fretted over spreading unrest in crude producer Iraq, traders said.
And gold scored a two-and-a-half week peak at $1,277.65 per ounce, as investors sought a haven investment.
"The deteriorating situation in Iraq, coupled with reports Iran may be looking to intervene, has given European (stock market) traders the cue to sell," said analyst Alastair McCaig at IG trading group.
- Costly oil hits firms -
The Iraqi government bolstered Baghdad's defences on Friday as jihadists pushed towards the capital and President Barack Obama said he was exploring all options to save Iraq's security forces from collapse.
Predominantly Shiite Muslim Iran will combat the "violence and terrorism" of Sunni extremists who have launched an anti-government offensive in neighbouring Iraq, President Hassan Rouhani warned on Thursday.
"This is an extremist, terrorist group that is acting savagely," Rouhani said, without elaborating on what steps Tehran would take to thwart a bid by fighters from the Islamic State of Iraq and the Levant (ISIL) to push toward Baghdad after seizing several cities and towns to the north.
Traders noted that soaring oil prices would translate into higher petrol prices and rising costs for consumers and companies alike.
"With US President Barack Obama not ruling anything out, we have to assume that the situation in Iraq is going to get worse before it gets better," said Alpari trader Craig Erlam.
"This will be disruptive to say the least, not just to the consumer who will see disposable income take yet another hit as they are forced to pay higher prices at the pump, but also to companies that rely on oil and gas.
"Hence, why these stocks could suffer a lot more in the coming weeks and months."
The share prices of airlines fell particularly sharply on Friday on the back of rising oil prices. Jet fuel or kerosene is refined from crude.
German airline Lufthansa topped Frankfurt's fallers board, with its shares tumbling 3.68 percent to 16.23 euros.
International Airlines Group, parent of British Airways and Iberia, saw its share price slide 3.91 percent to 375.9 pence in London.
And no-frills rival easyJet dived 4.06 percent to 1,440 pence.
- Sterling rallies -
In foreign exchange activity, the British pound surged close to a five-year peak against the euro, after Bank of England boss Carney warned the BoE could hike its main interest rate from a record-low 0.50 percent sooner than markets expect.
At 0900 GMT, the euro slid to 79.85 pence, which was the lowest level since mid-November 2012. It later stood at 79.98 pence, up from 80.08 pence late in New York on Thursday.
The British pound advanced to $1.6974 from $1.6923 on Thursday.
Against the dollar, the European single currency eased to $1.3576 from $1.3553 late in New York on Thursday.
On the London Bullion Market, gold later stood at $1,273.99 an ounce, up from $1,265.75 late on Thursday.
Asian equities ended mixed on Friday following a Wall Street sell-off, as oil prices leapt higher, but Hong Kong and Shanghai stocks reversed early losses after upbeat Chinese data, dealers said.