OIL prices reached a 13-year high yesterday leading to concerns about the economy.

The FTSE 100 Index tumbled 50 points during trading yesterday, recovering only slightly in late afternoon, after the cost of crude reached $36.60 in London, the highest price since the Gulf War in October 1990.

The prices result from demand for oil in China and India, and pressure on supplies caused by an economic recovery in the US.

Fears that oil installations in the Middle East have become terrorist targets, and production cuts by oil cartel Opec have driven prices higher.

Economists warned that the high cost of crude posed a threat to growth at a time when economies were recovering from a prolonged slowdown.

On Thursday, the Bank of England voiced concerns about inflationary pressures that contributed to its decision to raise interest rates to 4.25 per cent.

Also on Thursday, Prime Minister Tony Blair recalled the severe impact previous spikes in oil prices had on the global economy, while the International Energy Agency has warned that up to 0.5 per cent could be wiped off growth in major western economies.

Motorists are already suffering at the pumps, with the price of a litre of unleaded petrol rising above 80p.