Source: Sharecast
At 0830 GMT, the FTSE 100 was down 1.6% at 10,136.12. At the same time, Brent crude was up 5.6% at $113.37 a barrel and West Texas Intermediate was 0.9% higher at $97.16 after Iran attacked the world’s largest liquefied natural gas (LNG) export plant in Qatar at the Ras Laffan Industrial City.
Iran had warned it would target energy assets across the Gulf following Israel’s attack on the South Pars gas field.
Richard Hunter, head of markets at Interactive Investor, said: "The oil price remains in the driving seat, adding another spurt in reaction to a fresh bout of targeted attacks in the Middle East and depressing risk sentiment especially across equities.
"The main unknown and therefore the largest concern for investors has been the duration of the conflict. The longer it progresses, so the chances of higher inflation and crimped economic growth become elevated. At the current time, the conflict appears to be escalating rather than abating, with the rhetoric from both sides threatening further military strikes.
"With this backdrop in mind, central banks have had little option but to adopt a wait and see approach. Any inflationary impact from the conflict is not yet feeding through to economic data, and the Bank of Japan and Bank of Canada joined the Federal Reserve in leaving interest rates unchanged, with the Bank of England and ECB expected to follow suit later."
Investors were also mulling the latest data from the Office for National Statistics, which showed the unemployment rate was largely unchanged in January. The rate rose by 0.1 percentage point in November to January, to 5.2%.
Growth in average earnings including bonuses slowed to 3.9% over the same period, from 4.2%, in line with expectations. Stripping out bonuses, wages rose by 3.8%.
Driving the growth in pay was the public sector, which saw average regular earnings growth of 5.9%. The private sector saw a 3.3% rise.
Liz McKeown, director of economic statistics at the ONS, said: "Labour market conditions were little changed at the start of the year.
"The number of workers on payroll rose slightly in the latest month but, overall, the recent picture has been broadly flat.
"Regular wage growth is at its lowest rate in more than five years, with pay growth in both the private and public sectors continuing to ease."
In equity markets, precious metals miner Fresnillo and gold miner Endeavour both slid as gold and silver prices fell.
Miners Antofagasta, Anglo American, Glencore and Rio Tinto lost ground as copper prices retreated.
Unilever was in the red following a report it recently held talks with Kraft Heinz about a potential megamerger of their food brands that would have brought Heinz ketchup and Hellmann’s mayonnaise together under the same roof.
According to the Financial Times, the discussions in recent months, which have now ended, were over a merger of Unilever’s food business and Kraft Heinz’s condiments division.
NatWest, Standard Chartered, M&G, Hikma, Pearson, Melrose and Beazley all fell sharply as they traded without entitlement to the dividend.
On the upside, BP gained after saying it had sold its Gelsenkirchen refinery and related businesses to independent European refiner Klesch Group for an undisclosed sum, saving around $1bn in operating expenditure.
IG Group surged as it hailed record results and announced a strategic review that could include acquisitions, changes to domicile and listing venues and potential combinations of parts of the business with other industry players. It also announced a new £125m share buyback.