There are a couple reasons Hitler have the order, but another general gave the order first, that was Gerd Von Rundstedt. The man who really gave the order to stop the army was von Rundstedt who was in charge of Army Group A, the main force driving towards Dunkirk. While this lined up with Hitler’s view on the situation which he got from Rundstedt. However others in OKW or German High Command said to press on and tried to convince and even sidestep Hitler. OKW was so upset about the halt order by Rundstedt that they reallocated his Panzers. This infuriated Hitler as they did not ask nor received permission to do so from him. So he confirmed the halt given by von Rundstedt and gave back the Panzer divisions.

There are a few theories on why he gave the order in the first place. One theory is that Rundstedt believed another force of French troops would attack his flanks which were exposed due to the rapid advance. The Panzer divisions would be needed to repulse such an attack, as such Rundstedt would keep them back until his flanks were secure and then continue the attack. Further there is some belief the ground leading up to Dunkirk was not the greatest for tanks. This would be trouble for the tanks moving in difficult terrain and the tanks would have to rely on the infantry to support them and take the city. But the infantry was left far to the rear due to once again the rapid advance. The tanks could not move unsupported as they would be easy targets. Note that both of these theories of why he halted the attack are not a 100% confirmed and you should take it with a grain of salt.

There is also the rumor that Hitler let the British go at Dunkirk to show the British good favor and to maybe sign an armistice. However the attacks by the Luftwaffe on the British in Dunkirk and the sub attacks and plane attacks done on escaping ships dispel this myth. Hitler was very keen on destroying this force regardless of his views on the English.

However we do know that when the order was given Rundstedt that OKW did not like this and took away the Panzer divisions from his Army Group. Hitler did not like that OKW went over his head and sidelined him during this crucial advance. Overall there is not one reason why the order was given. There were multiple reasons and internal bickering that let the British get away. This combined with the heroic actions of the Royal Navy, RAF, and the French troops left behind to guard the British in rear guard actions, combined with the window of opportunity closed to destroy the British before they consolidated. This led to Germany losing its chance to crush the BEF and inflicting a operational defeat on the British. While Hitler is to blame for confirming the halt order, Rundstedt is responsible for giving the order. While we don’t know what was going through his head, his actions led to the BEF’s timely escape.

Sources:

Frieser, Karl-Heinz, and John T. Greenwood. The Blitzkrieg Legend: the 1940 Campaign in the West. Naval Institute Press, 2013.

Gardner, W. J. R. The Evacuation from Dunkirk: 'Operation Dynamo', 26 May-4 June 1940. Routledge, 2014.