The threat to investor confidence from rising oil prices was exposed today as the London market racked up heavy losses for a second session in a row.
Concerns over supply shortages and a potential cut in output by oil cartel Opec were strong enough to send the cost of crude back towards the $50 mark.
This dented support for a host of stocks that rely heavily on oil and pushed the FTSE 100 Index down 27.7 points to close at 4733.1.
Sentiment was also weakened by a warning from Federal Reserve chairman Alan Greenspan on Friday that the US may struggle to plug its massive budget deficit - estimated at $413bn (€316.7m).
Investors took his comments as confirmation that policymakers across the Atlantic were unwilling to spark a rally in the value of the US dollar.
A weak dollar hurts the UK economy by making British exports to the US more expensive. It also erodes exporters’ overseas earnings when they are converted back to the pound.
British Airways was one of the biggest fallers in London as renewed concerns over its fuel bill caused the blue-chip stock to dip almost 3% or 6.25p to 217.5p.
It was joined on the way down by steel maker Corus, off 0.5p at 52.75p as figures pointed to signs of declining demand from the booming Chinese economy.
That also impacted on heavyweight mining stocks with BHP Billiton down 9p at 586p, Anglo American off 23p at 1265p, Rio Tinto 17p lower at 1520p and Xstrata down 13p at 915p.
Shares in Xstrata were also depressed by its AUS$7.4bn (£3.12bn / €4.44bn) offer for WMC resources. Analysts fear a bidding battle that will drive up the price tag of Xstrata’s rival down under.
Media stocks were struggling with Reuters down 17.5p at 391.5p, Emap off 15p at 792p and FT owner Pearson down 10p at 625p.
Among a handful of stocks to avoid the sell-off, telecoms group mmO2 was unchanged at 114.5p after last week’s upbeat news on its expected maiden dividend.
Outside the top flight, shares in estate agency group Countrywide remained under pressure after Friday’s warning of a 33% fall in transactions. The stock, which fell 5% before the weekend, slipped another 2% or 7p to 275p.
It was followed lower by a clutch of housebuilders with Persimmon down 18.5p at 639p and McCarthy & Stone off 19p to 569p.
Despite the rising oil price, low-cost airline easyJet bucked the downward trend with a 2% gain – up 3.5p to 183.25p.
The improvement was achieved ahead of annual results from the FTSE 250 Index group tomorrow, as well as continued speculation about the 10% stake now held in the airline by Iceland’s flag carrier Icelandair.
The biggest Footsie risers were BOC Group, up 18.5p to 927.5p, Yell Group ahead 6.25p to 422.75p, National Grid Transco up 5.75p to 480.5p and Land Securities ahead 13p at 1230p.
The biggest fallers were Reuters, down 17.5p at 391.5p, British Airways off 6.25p at 217.5p, Schroders down 17p at 680p and Schroders NV off 15p at 613p.