More than £110bn has been wiped off the value of Britain’s leading companies as the FTSE 100 suffered its worst week in three years.
The index closed down 161.07 points on Friday, a loss of 2.49%, making an overall drop of 6.6% since Monday – the largest weekly fall since August 2011.
The slide reflected a new five-year low for the price of Brent crude and worries about the global outlook, particularly after more disappointing economic figures from China.
The FTSE 100 is dominated by business with an interest in the energy and commodity sectors, meaning it has taken a bigger hit from weak oil prices.
Oil stocks have taken a hit as weakening demand and the prospect of oversupply sparked a fall in the price of oil by 10% this week to around $62 (£39.50) a barrel.
The International Energy Agency on Friday cut its forecast for global demand for the fourth time in five months.
BP shares have fallen by 9% since the start of the week and are a fifth cheaper in the year to date.
In New York, the Dow Jones Industrial Average ended the week down 677.96 points or 3.8%, while markets in France and Germany were down by nearly 3%.
Traders were reacting negatively to the plunge in the oil price despite the likelihood that it could represent a $4bn (£2.5bn) stimulus to the world economy.
Laith Khalaf, senior analyst at Hargreaves Lansdown stockbrokers, said markets are mulling the question of whether a lower oil price is a “symptom or a cure” for weak global demand.
He said: “The answer is it is probably both, but the restorative qualities of a lower oil price are going to take some time to feed through, and in the meantime markets are focusing on the negatives.”