Shares drop as burning Ukrainian nuclear plant spooks traders across Europe

European markets on Friday reacted with horror to the fire at Europe’s largest nuclear power plant amid shelling by Russia in the area.

Although the situation is reportedly under control, stock indexes were down across the continent, with London’s top index, the FTSE 100, dropping to its lowest point since October on the news.

The index closed down by 3.5%, retreating to below the symbolic 7,000-point mark.

“Investors have been rattled by the turn of the fighting in Ukraine, after a nuclear plant was attacked which has heightened worries about the potential escalation of the crisis,” said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.

“The flight to safety is continuing on the financial markets as investors exit positions they see as more risky, and pile into other asset classes which they hope may offer some more defence against the volatility.

“Just over a week on from invasion, shockwaves are still sending repercussions across the world with many commodities shooting up to record levels and others to a price not seen in more than a decade.”

The worst performers on the FTSE 100 included some of the index’s travel companies, but ITV was also hit for the second day running after investors baulked at the level of investment it plans to put into a new digital offering.

In Europe both the main French and German indexes were heavily down, dropping by 5% and 4.4% respectively.

US markets were also down, though not as heavily.

Oil prices remained high, at 114 dollars for a barrel of Brent crude – it is still below the nearly 120 dollars that a barrel cost at one point on Thursday. UK natural gas prices have also spiked to an all-time high.

But it adds to the soaring cost of living, with prices of other commodities that come out of Russia and Ukraine – such as wheat – soaring in recent weeks.

AJ Bell investment director Russ Mould said: “Soaring commodity prices imply the cost of living is going up again, and it affects people around the world.

“Daily meals are getting more expensive. Wheat prices have hit a 14-year high which means the key ingredient for bread and pasta is getting more costly – that even affects the price of meat as wheat is used in animal feed.

“Aluminium prices are rising, so tin cans will go up in price. Oil is bubbling around 111 dollars per barrel, so you can be certain the petrol needed to drive the car to work is getting more expensive.

“Rare earth material supplies from Russia are under pressure, and they’re needed to make electronics devices. Even copper is going up in value and that’s used so widely.

“Disruptions to trade and supplies creates another headache for businesses and one reason why share prices have been falling in the past week or so is the market pricing in lower earnings.

“If costs are going up again, corporates must either stomach lower profit margins or risk passing on the costs to the end user. At some point soon consumers will not be able to cope with even higher prices, so corporates face a big demand test.”