By Josie Cox 

European shares dropped Thursday, pressured by a poisonous cocktail of downbeat economic data and rekindling tensions between Ukraine and Russia.

The Stoxx Europe 600 ended the session 0.7% lower on the day, while the euro resumed its fall against the dollar, losing 0.1% to trade at $1.318, after a brief spell of relief earlier in the week.

Assets perceived to be safest at times of stress, such as German government bonds, gold and the Swiss franc saw strong bids. Yields on the 10-year Bund touched a new historic low of 0.86%, while the Swiss franc climbed 0.1% against the euro and gold rose 0.6% to $1,291.40 a troy ounce.

France's CAC and the U.K's FTSE closed the session down 0.7% and 0.4% respectively, but Germany's DAX was the weakest of all the region's major indexes, falling 1.1% on the day burdened by disappointing unemployment data.

Figures showing that business and consumer confidence across the euro area deteriorated more than expected in August, further spurred the selloff, but investors broadly cited resurgent tensions in Eastern Europe as the predominant concern.

Ukraine on Thursday accused Russia of invading the country, dashing any hopes of a diplomatic resolution to the crisis and challenging the West to respond.

"There has been a steady trickle of evidence in recent days to indicate that the situation might well be getting worse rather than better," BNY Mellon chief market strategist Simon Derrick said, adding that there appeared to be a substantial risk "that this could turn into a rather more open conflict".

Others strategists and economists particularly voiced concerns over the implications of the ripening conflict for gas and energy markets.

Russia halted gas delivery to Ukraine in June and the European Union is trying to mediate between both countries.

"We believe that the status quo will continue grinding on until late autumn, with increasing costs for the Ukraine economy," Nomura analysts wrote in a note.

Bank of America economists Vladimir Osakovskiy and Arko Sen, meanwhile, trimmed their gross domestic product outlook for Russia to 0.5% this year and 1.5% in 2015.

"The lingering crisis continues to weigh on the Russian economy by further increasing borrowing costs and maintaining uncertainty," they wrote in a note.

Moscow's Micex index ended the session 1.7% lower on the day, while its dollar-traded counterpart, the RTS index, declined 3.3%.

Rosneft shares were down 1.2% at close of trade, while OAO Gazprom lost 1.3% and OAO Lukoil 0.6%. Shares in BP PLC, which owns a nearly 20% stake in Rosneft, were off 0.6%. Brent crude was down 0.2% at $102.48 a barrel.

In the Middle East tensions remained high too, after rebel factions in Syria on Wednesday were said to have captured a border crossing between Syria and Israel--the latter's second loss of a strategic site to extremist groups within days.

That also appeared to weigh on U.S. equity markets, where the S&P 500 was trading 0.2% lower in late European trade, despite a solid second reading on the country's second quarter gross domestic product figures.

A first reading in July showed that U.S. GDP advanced at a seasonally adjusted annual rate of 4.0% in the second quarter, already marking a significant rebound from a wintry 2.1% contraction during the first three months of the year. On Thursday the figure was notched up to 4.2%.

Beyond the Swiss franc, the Swedish krona was the big mover in currency markets, falling 0.2% against the euro to trade to 9.19 kronor, following disappointing retail sales for July.

Sales were forecast to have picked up 0.1% on the month, but dropped 0.7%. The krona also hit a 14-month low against its Norwegian counterpart.

Back in equities, French construction and road company Eiffage SA ended the session as one of the biggest gainers after posting a 17% increase in net profit in the first half of the year and saying it expects to boost earnings and reduce net debt in 2014.

At the other end of the spectrum, Ocado Group PLC was Thursday's biggest loser in Europe, sliding more than 15% to 339 pence, with traders citing a huge downgrade from brokerage firm Redburn.

Redburn analysts slashed Ocado's target price to 257 pence from 500 pence and downgraded their recommendation to sell from buy, describing the company's technology as overvalued.

Write to Josie Cox at josie.cox@wsj.com