The economic gloom deepened yesterday as global share markets fell sharply and crude oil prices soared to more than $147 a barrel.

The economic gloom deepened yesterday as global share markets fell sharply and crude oil prices soared to more than $147 a barrel.

Concerns that Israel may be planning to attack Iran's nuclear sites pushed oil futures up by more than $5 with one City trader predicting $150 a barrel oil was "just around the corner".

The London Stock Exchange closed in bear market territory with the FTSE-100 blue-chip index down 145.2 points at 5261.6 - its lowest closing level in nearly three years.

A bear market exists when a leading index falls 20% from its 12-month peak. The Footsie ended with a weekly loss of 2%, marking an eighth straight week in the red.

Shares in Royal Bank of Scotland plummeted nearly 9%, weighed down by Zurich Financial's decision to pull out of the multi-billion pound auction of the Edinburgh institution's Direct Line and Churchill insurance operations and further hit by the weakness of the global banking sector.

Exchanges on mainland Europe also suffered, with cheaper bank stocks offsetting gains by oil and gas companies.

US stocks were down sharply for much of the session.

The Dow Jones industrial average slumped below 11,000 for the first time since July 2006, as investors fretted about oil prices and the stability of home financing providers Black gold rallied to a new peak of $147.25 a barrel on the New York Mercantile Exchange on the Iran fears, before falling back later in the day to close at $145.08