The FTSE 100 joined European stock markets plunging deep into the red on Thursday as fears that the arrest of a senior Huawei official in Canada could reignite tension between the US and China.
London’s top flight was trading down 151 points, or 2.18%, at 6,770.9 in mid-day trade, a two-year low.
Huawei’s chief financial officer, Meng Wanzhou, faces possible extradition to the United States after her arrest on suspicion of trying to evade sanctions against Iran.
A Chinese government statement said Meng broke no US or Canadian laws and demanded Canada “immediately correct the mistake” and release her.
”China has, obviously, been quick to criticise the arrest while Huawei is demanding her release. It is yet another huge blow to what was already looking like a fragile and inchoate ceasefire, and has sent the markets into another value-eroding funk,” said Connor Campbell of SpreadEx.
Melrose Industries, Antofagasta and Prudential were among the biggest casualties in the ensuing stock market fallout, with each of their shares shedding over 6%.
Sterling was trading flat against both the US dollar and euro at 1.274 and 1.123 respectively as Brexit fears kept the British currency shackled.
Brent crude was trading down over 2% at 60 US dollars (£47) a barrel as Opec countries meet to find a way to support the prices.
Crude has been falling since October as countries such as the US and Saudi Arabia produce at higher rates, and due to fears that weaker economic growth will dampen energy demand.
Analysts predict the cartel will agree to cut production by at least one million barrels per day.
Falling oil prices also knocked both BP and Royal Dutch Shell, which were down around 3% on the FTSE 100.
Looking ahead to the US open, Mr Campbell added: “This week has been wild and there’s still a way to go before it is over, with the Dow Jones facing a multi-index pile-up when it returns to action this afternoon.”