The FTSE 100 has slumped heavily in response to the oil price plummeting by almost a third overnight.
The FTSE 100 has slumped heavily on the opening bell, as equity markets reacted to the oil price plummeting by almost a third overnight.
Oil tanked in response to Saudi Arabia launching the start of a price war by increasing production and drastically cutting its export prices on crude oil. The move came after OPEC members failed at the end of last week to come to an agreement with allies (including Russia) to cut oil production in response to the coronavirus outbreak.
The oil price fell nearly 30% to $31, which represents the biggest single day fall since the start of the first Gulf war in 1991. It has since staged a small recovery to $36 a barrel.
In response, the FTSE 100 tanked when trading kicked off this morning (8am), with the index slumping over 8% to fall below 6,000 points. European markets also slumped, with the German DAX declining 7.36% and the French CAC dropping 6.38%.
The falls were mirrored overnight by Asian markets, with Japan’s Nikkei 225 index down 5.07%, Hong Kong’s Hang Seng giving up 4.23%, while China’s Shanghai Composite index declined 3.01%.
In January, the FTSE 100 was trading at over 7,600 points, which is over 20% higher than its current level. An 8%-plus one-day decline would represent one of its biggest daily falls on record.
At the time of writing (8.30am), every UK stock in the FTSE 100 index was in the red, amid fears a global recession will take hold. Oil firms BP and Royal Dutch Shell have seen their share prices slump the most, both down around 20%.
Richard Hunter, head of markets at interactive investor, commented: “The confluence of events which has led to today’s declines are a bitter pill to swallow, but also a reminder that dynamic markets are by their nature prone to volatility.
"The oil price has been the latest victim from an evolving story which has heightened fears of a potential global recession, as initiated by the outbreak of the coronavirus.
"At the same time, China has confirmed that its exports fell by over 17% during January and February and even if the virus is showing signs of stabilisation both there and in Korea, concerns have now switched to the impact in both Europe and the US. At best, it seems that the first quarter is likely to be something of a write-off in economic terms and as the weeks tick by this could well flow into the second quarter as well."