More than £125 billion was wiped off the value of the UK's leading companies as markets were hit by an oil price war between Saudi Arabia and Russia.

The FTSE 100 leading index of shares in London closed on Monday down 7.7%, to its lowest level in almost four years, in the biggest single-day fall since the 2008 financial crisis.

The oil price war sent stock markets across the world plunging - at a time they were already suffering due to the worldwide outbreak of coronavirus.

The Dow Jones Industrial Average plunged 7.8%, and European markets entered a bear market, registering their heaviest losses since the darkest days of the 2008 meltdown.

The price of oil had already fallen sharply this year as Covid-19 began to spread internationally, resulting in expectations that demand for fuel would decline.

As the effects of coronavirus hit the worldwide economy - factories shutting as parts of China were placed on lockdown and restrictions on movement across the globe - some of the big oil exporters had been trying to stabilise prices.

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Last week a group of them discussed production cuts.

But the biggest producer among them, Russia refused and the oil price fell further.

Then at the weekend, Saudi Arabia, the biggest of the producers that were pressing Russia to agree output cuts, announced it would increase supplies and offered discounts to its buyers.

This decision cause traders to pull out, leading to the price of oil falling even further.

The FTSE 100 plunged as Saudi Arabia decided to increase production, sending prices down. Credit: Aramco/PA

Following its opening at 8am, the FTSE 100 leading index of London-listed businesses collapsed by more than 8%, wiping off more than 500 points.Oil also saw its fastest single-day fall since the first Gulf War.

By 8.30am the FTSE 100 was down 8.6%, down 558 points at 5903.34, to a four-year low, hitting levels not seen since the Brexit referendum result in 2016.

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Neil Wilson, chief market analyst at Markets.com, said: “This will be remembered as Black Monday.

"If you thought it couldn’t get any worse than the last fortnight, think again.

"The blood really is running in the streets, it’s utter carnage out there.

“The oil price shock has totally unnerved investors, while Italy’s decision to quarantine 16 million citizens in the north of the country has left markets feeling like the coronavirus outbreak is out of control – where next?

"The UK is preparing for the worst.”

Billions were wiped off the FTSE100. Credit: PA

Overnight a barrel of Brent Crude oil fell 30%, settling down 25.8% at $33.60 per barrel as European markets opened.

With oil priced in dollars, the pound benefited, rising by 0.7% to 1.316 dollars.

In London, shares in Royal Dutch Shell led the collapse, with the price down 22% within 30 minutes of markets opening.

BP also fell 19.6%, with shares down 79p at 316p.

Around 15 of the top 100 companies lost more than 10% of their value within the opening 30 minutes of trading.

The move comes as the Saudis said they would raise production, even if it means taking a hit, as it battles with Russia over how much oil should be produced during the coronavirus outbreak.

There had been demand for oil supplies to be cut, to help shore up the price.

But Russia indicated it would be willing to “turn on the taps”, leading to the Kingdom to fight back with a promise of cheaper oil.

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