UK shares have tumbled more than 8 per cent since markets opened this morning as oil prices tanked by almost a third.
The oil price decline came as Russia broke its partnership with Opec, prompting Saudi Arabia to launch an aggressive price war targeting the rival producer, FTAdviser’s sister paper the Financial Times reported.
Saudi Arabia is set to increase production and offer its oil at a big discount to win new customers just as the coronavirus outbreak hits demand, the report claimed.
Brent Crude Oil — the benchmark oil price — fell as much as 30 per cent this morning but has since trimmed losses to a 23 per cent drop as at 8.30am.
The price of oil has been on the decline recently and has lost nearly 50 per cent over the year.
Global markets have been rattled by the commotion, with the FTSE 100 losing 8.5 per cent this morning, the Nikkei 225 falling 5.3 per cent and the Euro Stoxx 50 dropping almost 7 per cent.
The spread on high-yield bonds in the Eurozone has widened dramatically, which has exacerbated the effect on Eurozone equity markets.
The FTSE 100 has been predominantly affected by Shell’s share price, which dropped 20 per cent, and BP, which is down 17 per cent.
Top fallers also include mining companies Evraz and BHP, both losing about 15 per cent of their share price.
Earlier this month the FTSE suffered its biggest weekly drop in more than eight years as the share prices of travel and tourism companies plummeted as the coronavirus crisis grew.
Helal Miah, investment research analyst at The Share Centre, said: “We don’t suspect this morning’s stock market fall will be the bottom, as the economic repercussions will come to light in the coming weeks and months and there remains the possibility other regions that are even more economically significant could face a similar fate.
“What do investors do from here? For most it probably is too late to panic. For investors who have structured their portfolio well then the only thing to really do is sit tight.
“Markets will recover over the medium to longer term which is what investors should be targeting as trying to be active in choppy markets could cause even more damage.”
imogen.tew@ft.com
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