Oil supply fears cause further FTSE fall

Fears of oil supply disruption due to Middle East unrest hit the FTSE in afternoon trading, pushing the FTSE 100 down 0.97 per cent to 5.935.76.

Concerns that the political unrest could spread to major world oil exporter Saudi Arabia caused crude prices to rise still higher and sent oil-sensitive travel stocks lower.

Brent crude rose 1.8 per cent to above $113 a barrel after an Egyptian report – though promptly denied – of Saudi tanks being sent to Bahrain to quell protests rattled investors.

Cruise operator Carnival, a heavy fuel user, slumped 5.56 per cent to 2,601p on the news, while energy firms Petrofac (up 3.95 per cent to 1,448p) and Essar Energy (up 1.64 per cent to finish at 525.5p) both gained.

“It appears that stocks will continue to be driven by the ebb and flow of the oil price as developments in the Middle East continue to act as a backdrop to sentiment in the equity market,” said Michael Hewson, market analyst at CMC Markets.

Outsourcing group Capita closed up 5.17 per cent at 763p after saying it was in talks with Zurich Financial Services about an extension of the term of Capita's existing contract.

Hewson said Serco, which finished up 1.74 per cent at 554p, gained after broker JP Morgan issued an upbeat trading note ahead of its full-year results tomorrow.

And Associated British Foods regained some of the ground lost yesterday, ending up 2.74 per cent at 993p in heavy volume after Evolution Securities upgraded it to "buy" from "neutral.

Others were not so fortunate: auto parts manufacturer GKN fell four per cent to 201.5p despite reporting a return to profit in 2010.

HSBC continued its slide, down 2.95 per cent at 658p after brokers Deutsche Bank and UBS downgraded their ratings.

And goods distributor Bunzl fell 2.37 per cent to end at 742p despite posting solid results yesterday.

Yusuf Heusen, senior sales trader at IG Index said negative sentiment from the US had added to the late market fall.

“The FTSE turned sharply lower as Wall Street came on stream. Markets appear to be unwilling to find support in Fed chairman Ben Bernanke’s testimony to the Senate Banking Committee,” he said.

Bernanke said rising commodity prices were likely to cause significant increases in headline inflation, which may limit US economic growth.