The turmoil in Libya heaped further pressure on stocks around the world Wednesday as investors worry that the global economic recovery may be derailed by the sharp rise in oil prices and swelling inflation.
Concerns that the country is descending into civil war were heightened by comments Tuesday from longtime leader Moammar Gadhafi that he would fight to his "last drop of blood," while urging supporters to strike back against protesters to defend his embattled regime.
The rhetoric, alongside mounting evidence of bloodshed around the country, got investors fretting over how the crisis will end and what the impact on the North African country's oil production will be.
Libya is the world's 18th largest oil producer, pumping out around 1.8 million barrels a day, or a little under 2 percent of global daily output. The OPEC country also sits atop the biggest oil reserves in the whole of Africa.
As a result, oil prices have risen even further following Tuesday's surge higher.
Benchmark crude for April delivery was up 35 cents at $95.77 a barrel _ the highest since October 2008 _ in electronic trading on the New York Mercantile Exchange. The contract jumped $5.71, or 6.4 percent, to settle at $95.42 on Tuesday.
In London, Brent crude for April delivery rose $2.61 to $108.38 a barrel on the ICE Futures exchange.
Higher oil prices were hurting stocks.
"Soaring energy prices are a clear consequence of events in Libya and the surrounding countries so this is also going to start sapping economic confidence," said Ben Potter, research analyst at IG Markets.
In Europe, the FTSE 100 index of leading British shares was down 0.7 percent at 5,957, while the CAC-40 in Paris fell 0.1 percent to 4,047. Germany's DAX was 0.5 percent lower at 7,279.
Wall Street was poised for a modest rebound after heavy losses Tuesday _ Dow futures were up 23 points at 12,206 while the broader Standard & Poor's 500 futures rose 1.4 point to 1,315.90.
On Tuesday, the Dow slid 1.4 percent while the S&P fell 2 percent.
Elsewhere, the main point of interest was the release of the minutes to the last meeting of the Bank of England's rate-setting meeting. They showed another three-way split, but with Spencer Dale joining the camp of those wanting to raise the benchmark rate from the current record low of 0.5 percent.
That means only two more of the nine-member panel have to swing behind calls for an interest rate rise for borrowing costs to increase.
"This reinforces market expectations of a rate hike by the middle of this year and possibly by as early as May," said Michael Hewson, market analyst at CMC Markets.
The release of the minutes gave the British pound a limited bounce as the details of the vote had been widely anticipated.
By mid afternoon London time, the pound was 0.4 percent higher on the day at $1.6232.
Elsewhere in the currency markets, the euro was trading 0.3 percent higher on the day at $1.3725, supported by figures showing that industrial orders in the 16 countries that were using the euro in December unexpectedly spiked by a monthly rate of 2.1 percent. The expectation in the market was that orders would fall by a 0.9 percent monthly rate.
Earlier in Asia, Japan's Nikkei 225 stock average shed 0.8 percent to close at 10,579.10, while South Korea's Kospi dropped 0.4 percent to 1,961.63. Hong Kong's Hang Seng index fell 0.4 percent to 22,906.90.
New Zealand's main stock index rose 0.4 percent to 3,372.07 after falling the day before when a powerful earthquake devastated the city of Christchurch. Prime Minister John Key declared a state of national emergency and said 75 people were confirmed to have been killed in what was one of the country's worst natural disasters.
In mainland China, shares edged higher as investors snapped up bargains following a sell-off the day before. The benchmark Shanghai Composite Index edged up 0.3 percent to 2,862.63 while the Shenzhen Composite Index rose 0.9 percent to 1,273.92. Shares in paper processing, biotechnology and information technology led the gains.
Pamela Sampson in Bangkok contributed to this report.