Stock markets in Europe and the US are facing for their biggest worst falls since the 2008 financial crisis after the trading week began with panic selling amid the double threat of a coronavirus-driven global recession and an oil-price war.
The FTSE 100 was projected to plunge by 6.3% when trading begins on Monday, while the Dow Jones industrial average was on course to lose 4.9% in New York.
It follows huge losses on Asian markets on Monday, where fears about the worsening worldwide economic slowdown were exacerbated by the shock decision by Saudi Arabia over the weekend to increase oil production in an attempt to drive competitors such as Russia and the US out of the market.
The price of Brent crude oil fell nearly 30% to $31.14 on Monday, its biggest single fall since the start of the first Gulf war in 1991. Some experts predicted it could fall even further unless the Saudis and Russians returned to the bargaining table.
Italy was descended into instability as the number of fatalities increased by more than 50% to 366 and government plans to lock down large parts of the country’s north, or about 25% of the population, were leaked to the media.
The price of oil had already fallen sharply this year as the coronavirus disease began to spread internationally, with demand for fuel expected to decline.
Last week, oil exporters’ group Opec – which includes Saudi Arabia – agreed to cut production in order to support prices.
However, it also wanted non-Opec oil producers such as Russia to agree to cuts, and on Friday Russia rejected the plans.
In response, Saudi Arabia has cut its official selling prices for oil and plans to increase production. The move is seen as Saudi Arabia flexing its muscles in the oil market to make Russia fall into line.