Oil and gas prices are climbing on fears that the Ukraine-Russia crisis will disrupt supplies across the world.
The price of Brent crude, an international benchmark, reached a seven-year high of $99.38 (£73) a barrel on Tuesday.
The RAC motoring group warned that rising crude oil prices would hit UK petrol prices.
Russia ordered troops into two rebel-held regions in Ukraine’s east after it recognized them as independent states.
In London, the FTSE 100 share index opened more than 1.4% lower before regaining some ground.
Asian stock markets closed lower, and US stock exchanges were braced for losses.
The UK and several western allies have threatened sanctions against Russia, which is the second-largest oil exporter after Saudi Arabia. Russia is also the world’s top producer of natural gas.
Russia has said its troops will engage in “peacekeeping” in the self-declared Donetsk and Luhansk people’s republics.
But the US has said calling them peacekeepers is “nonsense”, and that Russia is creating a pretext for war.
The Ukraine-Russia crisis could have “substantial implications” on oil prices, which have jumped more than 10% since the start of the month, said Sue Trinh of Manulife Investment Management.
Sanctions forcing Russia to supply less crude or natural gas would have “important impact on the global economy”, she added.
Maike Currie, an investment director at Fidelity International, said oil could go above $100 a barrel due to a combination of the Ukraine crisis, a cold winter in the US, and a lack of investment in oil and gas supplies around the world.
“Russia accounts for one in every 10 barrels of oil consumed globally, so it is a major player when it comes to the price of oil, and of course, it’s really going to hurt consumers at the petrol pumps,” she said.
There have been US and EU sanctions on Russia for a number of years, which has had a “massive impact” on the Russian economy.
Sanctions are likely to be “deepened”, Ms Currie said, including sanctions on financial institutions, technology such as chips, and individuals.
Most of the oil and gas that the UK imports do not come from Russia, but if Russian supplies are constricted, wholesale prices are likely to rise around the world.
This could drive up already high inflation rates in the UK and elsewhere, economists said.
Petrol price spike
The RAC said average pump prices for petrol reached a new high of 149.12p a litre on Sunday, before slipping falling back to 149.03p on Monday.
The average diesel price hit 152.51p a litre on Monday, just below Sunday’s record 152.58p.
“Russia’s decision to invade Ukraine is already causing oil prices to rise and will undoubtedly send fuel prices inexorably higher towards the grim milestone of £1.50 a litre,” said RAC fuel spokesman Simon Williams.
“This spells bad news for drivers in the UK struggling to afford to put fuel in their cars.
“With retailers quick to pass on any wholesale price rises they experience, we could sadly see the average price of unleaded hit 150p in the next few days and diesel approaching 154p.”