Oil prices have surged past $100 (£74) a barrel to hit their highest level for more than seven years after Russia launched an invasion of Ukraine.
Global shares fell and the price of gold rose as investors worried about the possible impact of the conflict.
Russia is the second biggest exporter of crude oil, and is also the world’s largest natural gas exporter.
The price of oil topped $103 a barrel, and one motoring group said UK petrol prices had hit another record high.
The UK only gets 6% of its crude oil and 5% of its gas from Russia, but there are concerns that sanctions could limit supplies and drive up prices worldwide.
The price of UK natural gas futures soared nearly 30% on Thursday.
UK consumers are already paying a high price for energy and fuel, with demand surging and following the easing of Covid restrictions.
According to reports, the average price per litre for unleaded petrol hit a record high of 149.
43p on Wednesday, with diesel at 152.
The motoring group said that fresh record highs were likely “anytime soon” given the rise in the oil price.
Another motoring body, the RAC, said that if the oil price reached $110 a barrel the average price of petrol could hit £1.
55 a litre.
According to RAC’s media relation manager Simon Williams If prices do get this high it will “cause untold financial difficulties for many people who depend on their cars for getting to work and running their lives as it would sky rocket the cost of a full tank to £85.
” Reports of Russia’s actions, led to steep falls on stock markets across Europe, with the UK’s FTSE 100 index down 2.
5% and Germany’s Dax index falling 3.
Earlier, stocks in Asia had also fallen sharply.
The price of gold which is considered a haven asset in times of uncertainty rose 2%.
Investment director at AJ Bell, Russ Mould, said the oil price surge “was terrible news for businesses and consumers” because “it will serve to further stoke inflation.
“Not only will energy bills keep going up, but food prices look set to jump even higher.
Ukraine and Russia are both big food suppliers and any disruption to supplies will force buyers to seek alternative sources, which could jack up prices.
The cost of living hit a fresh 30-year high last month as energy, fuel and food prices continued to soar, increasing the squeeze on household budgets.
Meanwhile, Mr Mould said the fall in the FTSE 100 “was bad news for the millions of savers and investors who have money in UK equities, but it is by no means one of the worst days in history for the UK market”.
He said German and Chinese markets had dropped much further.
“That is partially down to the UK market having a large weighting towards the energy sector, with index giants BP and Shell benefiting from oil breaking through $100 a barrel,” Mr Mould added.
In response to Russia’s military action, European Union leaders said they would put more sanctions in place on Russia.
The European Council said it would “impose massive and severe consequences on Russia for its actions.
President of the European Commission, Ursula von der Leyen, said the sanctions “will target strategic sectors of the Russian economy by blocking their access to technologies and markets that are key for Russia.
Russian assets in the EU will be frozen and Russian banks’ access to European financial markets will be stopped, she said.
“These sanctions are designed to take a heavy toll on the Kremlin’s interests and their ability to finance war,” she added.
The US and EU had already imposed a series of sanctions in response to Mr Putin’s actions against Ukraine.
The UK has frozen the assets of five banks and three Russian billionaires, who have also been hit with travel bans.
Boris Johnson said these sanctions were a “first barrage” and could be extended.
The US increased pressure on Russia by imposing penalties on the Russian firm behind the Nord Stream 2 gas pipeline and its corporate officers.
Germany has already frozen final approval for the pipeline, which connects the country with Russia and was set to boost Russian gas exports to the EU.
Russia’s former president, Dmitry Medvedev, and now deputy chairman of its Security Council, said the move would hurt European consumers.
“Welcome to the brave new world where Europeans are very soon going to pay €2,000 for 1,000 cubic meters of natural gas!” he tweeted suggesting prices were set to double.
Oil rises past $100 after Russia military action