CAC leads European shares lower as Iraq worries weigh on market

* Fall in GDF Suez (TLO: GAZ-U.TI - news) weighs on France's CAC equity index

* Traders cite Iraq violence as reason for equity pullback

* FTSEurofirst 300 down 0.7 pct, CAC down 0.8 pct

By Sudip Kar-Gupta

LONDON, June 25 (Reuters) - European shares fell on Wednesday, led lower by a drop in France's CAC index, with traders citing fears that violence in Iraq will escalate further as a cue for investors to cash in on last month's equity rally.

The pullback in Europe, where stock markets such as the German DAX had hit record highs earlier this month, mirrored a decline in U.S. and Asian stocks.

"Investors are still concerned about American foreign policy and what will be the next step in terms of any military intervention as opposed to diplomacy in the Middle East region," said Lorne Baring, managing director at asset management firm B Capital (Other OTC: CGHC - news) .

Although the price of oil edged down, traders said events in Iraq remained worrying enough to justify trimming back equity positions in case the situation deteriorated.

Militants attacked one of Iraq's largest air bases on Wednesday as the first U.S. teams arrived to assess the Iraqi security forces and decide how to help counter a mounting Sunni insurgency.

GDF SUEZ WEIGHS ON FRENCH MARKET

France's CAC index fell 0.8 percent, underperforming declines of 0.5 percent on the German DAX and on the euro zone's blue-chip Euro STOXX 50.

The Paris market was pegged back by a 2.6 percent drop in utility GDF Suez after the French state sold a 3.1 percent stake in the company at a price of 20.18 euros per share, the bottom of a range for the share placement set by bookrunners.

The pan-European FTSEurofirst 300 index, which had hit a 6-1/2 year high of 1,399.62 points last week, was down by 0.7 percent at 1,377.63 points.

"We're still in reasonable shape, but we were looking a bit toppy on the upside, and there are one or two jitters around," said XBZ Ltd's European equity options broker Mike Turner.

Europe bourses in 2014: http://link.reuters.com/pap87v

Asset performance in 2014: http://link.reuters.com/gap87v

Today's European research round-up (Additional reporting by Blaise Robinson and Atul Prakash; Editing by Catherine Evans)