Oil prices have hit a seven-year high after Russia ordered troops into two breakaway regions of Ukraine.
The news will worry hard-pressed Brits who are already paying record prices for petrol and diesel.
Stock markets have also tumbled worldwide on the news.
Brent crude surged to its highest level since September 2014, reaching 99.5 US dollars a barrel at one stage due to fears over disruption to supplies, with Moscow's actions set to prompt new sanctions from governments worldwide on Russia.
The UK Government is preparing to unveil sanctions on key Russian figures and businesses after President Vladimir Putin recognised two regions of eastern Ukraine as independent states and began moving in troops and tanks for "peacekeeping" duties in Donetsk and Luhansk.
There are fears that Russia - the world's second largest oil producer - may look to retaliate in response to sanctions by the West, in particular with moves to hold back oil and gas supplies.
Shares tumbled amid the intensifying crisis between Russia and Ukraine, with the FTSE 100 Index falling more than one per cent at one stage after heavy overnight drops seen in Asia, before London's top tier pared back declines to settle around 0.5 per cent lower.
The Hang Seng index in Hong Kong tumbled 2.7 per cent, while the Nikkei 225 in Japan finished 1.7 per cent down, sparking heavy falls across Europe when markets opened.
Germany's Dax stood 0.7 per cent down and the Cac 40 in France was 0.5 per cent lower.
Russ Mould, investment director at AJ Bell, said the latest sell-off came as investors moved to dump shares in commodity producers, particularly those with exposure to Russia or Ukraine.
He said this would keep volatility high on stock markets across the globe.
Mr Mould said: "The threat of Russia invading Ukraine was clearly visible at the end of 2021, but most investors were more concerned about inflation and how fast interest rates might go up.
"Now the threat of war is very real, and investors will need to add it to their growing list of things to worry about. This could prompt another bout of panic and lead to heightened market volatility."
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