Oil prices have fallen sharply and global stocks bounced on hopes of a boost in production that could offset some of the supply disruptions caused by sanctions on Russian output.

Brent crude fell by as much as 17%, or $22, to just under $106 a barrel – having surged to a 14-year high of $139 earlier this week after the idea of the sanctions were first floated.

The slide was attributed to the United Arab Emirates, a member of the OPEC cartel, saying it would support increased production, and reports of similar remarks by Iraq.

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Wholesale gas prices tumbled too, with the UK price per therm for wholesale delivery sliding 30% to 342p – down from the 670p all-time peak recorded just two days ago.

Gas prices have been the main factor behind Britain’s cost of living crisis – but despite the latest fall they remain at levels that prompted a recent sharp increase in the energy price cap and resulted in a number of energy suppliers going bust over recent months.

A slip in the oil price could, at least over future months, ease the outlook for motorists as latest daily figures again saw the cost of petrol hitting new record highs.

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The fall also helped stock market investors, who have been fearful of the impact of an inflation shock caused by the Ukraine war – and the resultant surge in the price of oil and other commodities from wheat to nickel.

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• No-fly zone is needed to avert humanitarian catastrophe, says Ukraine’s leader
• UK will not escalate the conflict ‘in a way that would be unacceptable’ to the world, transport minister says
• Chernobyl radiation fears as minister calls for Russia to allow for urgent repairs
• First Lady Olena Zelenska writes open letter condemning Putin and ‘mass murder of civilians’

On Wednesday, traders were piling back into shares that had previously sold off.

In London, the FTSE 100 was up by 3.25%, or more than 200 points, adding about £60bn to the value of its constituent companies.

Market watchers said the mood was also partly driven by “buy the dip” sentiment – or what some call a “dead cat bounce”.

The rally was still not enough to make up for the steep sell-offs over recent days and was not even the biggest of the current crisis – after a 3.92% gain for the FTSE 100 on 25 February.

Craig Erlam, senior market analyst at OANDA, said: “Perhaps what we’re seeing is a hopeful rally rather than one built on solid foundations.

“I’d be surprised if it’s sustained for any significant period of time unless we see actual progress towards a ceasefire and Russian exit.”

Elsewhere, Germany’s Dax was a big winner on Wednesday with a 7.9% bounce that was the sharpest one-day jump since the volatile period in the early part of the pandemic two years ago.

The Dax has suffered the most among European stock indices due to Germany’s exposure to Russian energy supplies and had closed on Tuesday in so-called “bear market” territory more than 20% below its most recent peak.

On Wall Street, the Dow Jones and the S&P 500 were both more than 2% higher and the tech-driven Nasdaq soared more than 3%.

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