* FTSEurofirst 300 down 0.6 pct
* Afren suspends output from Kurdistan, shares weaken
* Nokian Renkaat hit by plummeting sales in Russia
* Monte dei Paschi falls after results
By Tricia Wright
LONDON, Aug 8 European shares dropped on Friday, sinking for the seventh time in eight sessions, on growing nervousness after U.S. President Barack Obama authorised air strikes in Iraq.
Obama said on Thursday he had authorised U.S. air strikes to blunt the onslaught of Islamist militants in northern Iraq as well as airdrops of supplies to besieged religious minorities.
"There (are) just no buyers out there, and indexes keep breaking support levels one after the other," FXCM analyst Vincent Ganne said.
"People have been caught off guard. The geopolitical risks have been treated as 'noise' by investors in the past few months, but now they suddenly realise that it's much more than just 'noise'."
London-listed oil producer Afren said it has suspended output at its Barda Rash oilfield in Iraqi Kurdistan, the first field to shut in Kurdistan as Islamic State militants advance towards the oil-rich region.
Its shares fell 1.4 percent.
The Iraq news was met by investors already rattled by tensions between the West and Russia which, along with weak European economic data and the prospect of U.S. monetary tightening, have hit global stock markets in the past weeks.
At 1142 GMT, the FTSEurofirst 300 index of top European shares was down 0.6 percent at 1,307.10 points, its lowest level since mid-April. But the index did pare back its earlier losses as traders cited rumours Russia was seeking to de-escalate the Ukrainian conflict.
Underscoring the broad market concerns, U.S. funds invested in European equities suffered their longest outflows streak in three years in the seven days to Aug. 6 as they bled money for the eighth consecutive week, Lipper data showed.
Fund managers, fearing that the outflows may have further to go, were sticking to the sidelines.
"I don't see this trend reversing very quickly, so I would not step in and buy European shares right now," Hampstead Capital hedge fund manager Lex van Dam said.
In a further negative sign, shares in Nokian Renkaat shed 6.2 percent after the Finnish tyre maker reported a second-quarter operating profit below expectations due to plummeting sales in Russia.
European airlines also fell, with Air France losing 2.1 percent, and Lufthansa down 1.7 percent.
Russian Prime Minister Dmitry Medvedev said on Thursday Moscow was considering banning European and U.S. airlines from flying transit routes through Russian airspace in retaliation for tougher sanctions from Europe and the United States.
According to data from Flightradar24, Lufthansa and Air France-KLM would be hardest hit by a potential closure of the airspace over Siberia.
Also on the downside, shares in Monte dei Paschi di Siena dropped 6.8 percent after Italy's third-biggest bank posted a worse-than-expected loss in the second quarter as charges on souring loans rose, underlining the challenges the bailed-out lender still faces to turn itself around.
Britain's Financial Conduct Authority said on Friday it has banned short-selling in shares of the bank, following similar action by Italy's regulator Consob.
Europe bourses in 2014: link.reuters.com/pap87v
Asset performance in 2014: link.reuters.com/gap87v
Today's European research round-up (Additional reporting by Blaise Robinson and Francesco Canepa; Editing by Hugh Lawson)