Stock markets worldwide were gripped by fear as London's FTSE 100 Index endured its worst week since the Black Monday crash of 1987.
Recession panic and concerns over fragile banks sent investors stampeding for the exits as the Footsie tumbled 8.9% - surpassing even Monday's record sell-off.
The Footsie has plummeted 21% over the week - wiping more than £250 billion off the value of top-flight stocks in the process.
The index eventually finished below the 4,000 mark at 3932.1 - its lowest close for more than five years.
The 21% fall comes close to the 22% slide seen by London's leading shares in the aftermath of Black Monday.
Following heavy overnight declines in Asia, screens turned red in the City as the London market approached falls of 10% at one stage. A dire start to US trading offered no respite.
The Dow Jones Industrial Average, which fell more than 7% on Thursday, tumbled as much as 8% during a volatile early session.
City watchers were confounded by the falls ahead of crisis talks among the G7 finance ministers this weekend. David Jones, chief market strategist at IG Index, called it "another ugly day".
"There is a real sense of despair... it is difficult to see what can be done to effect a handbrake turn in sentiment in the short term," he said.
CMC Markets' James Hughes added: "It is just utter panic."
Across Europe, France's CAC 40 and Germany's Dax were also showing losses of 7% and 8% respectively amid the carnage.
In London, banking stocks were among the biggest victims of the turmoil as speculation mounted over the billions they may need to strengthen their finances.
Royal Bank of Scotland lost 25% and is down a mammoth 61% this week, and Halifax Bank of Scotland fell 19%, and 37% over the week. Barclays tumbled 14%, making a 42% slump in the past seven days.
Manoj Ladwa, senior trader at ETX Capital, said: "Markets are normally held in equilibrium by the balance of fear and greed. But at the moment, greed has gone into hiding and fear rules the roost."
The sell-off sent the value of safe havens such as gold up by as much as 4% as investors took their money out of volatile stock markets.
The panic came amid little sign that Government efforts to rescue banks on Wednesday with a £400 billion package of capital and guarantees had eased the thaw in frozen money markets.
Alongside the crisis-hit banking sector, heavyweight mining stocks plunged amid falling base metal prices and growing panic over a potential global recession.
On Wednesday, the International Monetary Fund issued a fresh warning that Britain was on the brink of recession - predicting in its latest World Economic Outlook that the economy would contract by 0.1% next year as growth across the developed countries slowed to almost zero.
In London, mining firm Vedanta Resources led a retreat for the sector - down 13% - as investors worried over falling demand for metals and minerals.
The same factor was hitting crude oil, which was trading below 80 dollars a barrel for the first time in a year.
In New York, crude for November delivery reached a low of 78.61 dollars - little more than half the 147 US dollars a barrel it peaked at less than three months ago. Brent crude was as low as 75.08 dollars a barrel in London.
The falling crude prices weighed on petrochemical heavyweights BP and Royal Dutch Shell, which fell 8% and 9% respectively.
Only one Footsie stock finished in positive territory - media group Thomson Reuters.