On Monday morning, the FTSE 100 joined the other major financial markets with a firm slump, dipping by as much as 1.7%.
Global financial markets slid further on Monday after oil prices rose above 100 dollars a barrel amid concerns of a mounting supply crisis caused by the Iran war.
Nevertheless, early volatility calmed during the afternoon despite finance ministers and the International Energy Agency (IEA) ending talks without striking a deal to release extra crude oil reserves.
A joint statement from the group of ministers revealed they had discussed a possible joint release of petroleum from reserves to reduce the economic shock of the oil price hike.
But no immediate action appeared likely following the meeting, with the G7 pledging to “continue to closely monitor the situation and developments in the energy markets” and meet when needed.
The hectic day of trading also followed Iran’s move to name the son of its late supreme leader and a hardliner in charge as the war spreads further across the Middle East, with Iran targeting regional energy infrastructure and blocking the crucial Strait of Hormuz shipping route, through which a fifth of the world’s oil is carried.
On Monday morning, the FTSE 100 joined the other major financial markets with a firm slump, dipping by as much as 1.7%.
However, the index of top UK stocks made a steady recovery throughout the trading session.
At the close of play in London, the FTSE 100 was 0.34%, or 35.23 points, lower at 10,249.52.
The more domestically focused FTSE 250 was 1.59% lower.
It came as oil prices shot higher once again, driven by growing concerns that energy supply will be constrained by the continued recent attacks in the Middle East.
Benchmark Brent crude soared early in trading, having at one stage reached nearly 120 dollars in levels not seen since the summer of 2022.
By the close of trading in London, it had lost a significant amount of these gains but was still 7.78% higher for the day at 100.11 dollars.
Chris Beauchamp, chief market analyst at online trading and investing platform IG, said: “The overnight panic in oil has eased for now as the price reverses its madcap gains above 100 dollars, but the underlying reasons for the shock move remain in place.
“It is now open season on oil infrastructure across the region, which puts a near-term floor under the price well above the pre-war highs.
“Iran might be into the predictions game with warnings of 150-dollar and 200-dollar oil, but even a co-ordinated release of reserves is unlikely to halt the rise unless a ceasefire appears soon.”
Oil prices are now around 60% higher than they were when the war started.
The cost of crude can have a significant effect on wholesale fuel prices, which is sending costs at the petrol pumps sharply higher.
Think tank the Energy and Climate Intelligence Unit said its analysis of the historic link between oil and fuel prices shows oil trading at 100 dollars a barrel results in petrol prices of about 150p per litre, while oil hitting 120 dollars a barrel means petrol prices of about 170p per litre.
The RAC said the average price of a litre of petrol at UK forecourts was 137.5p on Sunday after rising nearly 5p since February 28 when the conflict in the Middle East started.
Average diesel prices were up almost 9p over the same period to 151p.
There are also worries over the impact on energy prices in the UK, with wholesale global prices likewise having soared as Qatar’s state-backed energy company QatarEnergy having halted production of liquified natural gas because of attacks on its facilities, with Kuwait following suit.
Wholesale gas prices feed through into electricity prices and how much it costs to heat people’s homes.
