Leading British shares dropped 1 percent on Thursday, as escalating geopolitical tensions, record high oil prices and concerns over U.S. corporate profits sent jitters through global equity markets, while a decline in Aviva Plc shares also weighed.
The FTSE100 index hit its lowest level in more than a week and by 1102 GMT was down 63.6 points at 5,797.
News that Israel struck Beirut airport and blockaded Lebanese ports, killing civilians, added to recent political concerns and further hurt a market already worried about rising interest rates, as crude prices surged to a record high near $76 a barrel. Tensions surrounding North Korea and Iran have recently been a talking point for markets, while bombings in Mumbai on Tuesday increased the appeal of safe-haven assets.
Concerns over heightened Middle East tensions knocked shares in the world's largest cruise operator, Carnival Plc, by 3.3 percent. A spokesman for Carnival had no immediate comment.
The Carnival share price fall is a reaction to the world becoming a slightly more dangerous place. Americans don't get on boats or go on holiday outside their own shores so much when the Middle East is kicking off and there are concerns over Iran, said a trader.
Shares in insurer Aviva fell 2 percent after it said its 900-million-pound share placing had been successfully completed. Earlier it said it was placing 129 million new shares at 700 pence apiece to help fund its agreed $2.9 billion takeover of U.S. life insurer AmerUs Group Co.
An expensive and unattractive deal which may be followed by another since (it is) not big enough, said one dealer. The shares however could do well after recent underperformance and good H1 results, but with a competitive outlook for the UK Life market in H2 I would not go much beyond the bounce chasing the shares....
The financial sector bore the brunt of the decline, with banks responsible for 18 points of the FTSE's losses.
Even miners, which have been buoyant in recent sessions, fell as copper prices eased from recent six-week highs. Antofagasta was down 3.3 percent, Rio Tinto
Downbeat Wall Street stocks overnight set the tone for a weak open in Europe, as all three major U.S. stock indexes lost more than 1 percent and with U.S. stock futures pointing to another gloomy trading session in the United States.
Over the last 24 hours we've had a couple of not encouraging numbers out of a couple of American technology companies, we've had an increase in tension in the Middle East and tomorrow the Bank of Japan is expected to raise interest rates and people aren't quite sure what the implications of that are, said Andrew Bell, strategist at Rensburg Sheppards, a UK fund management firm.
So it's just producing a bit of a down drift for a few days in markets that had previously recovered a bit of the ground they lost a couple of months ago.
Among mid-caps, shares in Britain's biggest listed insurance broker Jardine Lloyd Thompson Group Plc tumbled 12.2 percent after Heath Lambert Group said it had ended talks with JLT about it buying Heath Lambert.
Emap also fell 12.7 percent after the UK media group said that underlying revenue may be down slightly in the first half and broadly flat for the year amid worsening trading conditions.
But energy stocks managed to avoid the downward pull, finding some respite in rising oil prices. Scottish and Southern Energy Plc rose 0.4 percent, while oil major BP was up 0.1 percent.
(Additional reporting by Keiron Henderson)