Britain's top ranking shares took a battering yesterday as political tensions intensified around the globe and oil prices crept to record highs.
Worries over North Korea and Iran were joined by concerns following Israel's attack on Beirut airport, while Tuesday's bombings in Mumbai furrowed more brows.
It sent stock markets around the world tumbling with the FTSE 100 Index in London down almost 100 points and the Dow Jones Industrial Average in New York closing down 169.71 points, or 1.54 per cent, at 10,843.41.
Instability in the Middle East raised fears about future oil supplies - US crude traded $1.55 higher at $76.50 a barrel after hitting a record $76.55. London Brent was up $1.86 at $76.25 after reaching a record $76.31.
Richard Hunter, head of UK equities at Hargreaves Lansdown Stockbrokers, said a weakening Dow Jones was having an impact on an already nervous UK market.
He said: "The original fall was because of Wall Street, whose weak performance yesterday has been compounded by another weak performance today. At the moment the UK market is heavily weighted towards what is happening in America and the tension elsewhere in the globe isn't helping. It's all well and good for oil companies, but not the firms who are dependent on oil."
Among the Footsie firms highly dependent on oil is chemicals giant ICI, where shares were down four per cent yesterday.
Analysts also said investors were unsure about the effect of the interest rate decision by the Bank of Japan.
The Nikkei plunged more than 150 points on Wednesday while the Hang Seng in Hong Kong was down more than 200 points.
Renewed worries over supply from major exporter Nigeria and conflict between Israel and Hizbollah in Lebanon forced the prices higher.
Prices also rose as the Iran nuclear row appeared to be heading to the UN Security Council. North Korea walked out of talks with South Korea and crude inventories in top oil consumer the United States fell more than expected.
"Geopolitical risk is out of control," said Tony Nunan, a risk manager at Mitsubishi.
"There's a pipeline attack in Nigeria, Israel is taking a strong stance and that's adding fuel to the fire, but more than anything it's US gasoline demand holding up and the Iran situation."
