Market Report: Ireland's benchmark index fell for the second session this week, led by financial shares, as domestic stocks tracked declines in the US and Europe amid investor concern worldwide that turmoil in the Middle East may escalate and oil prices will continue to rise.

The Iseq dropped 127.59 points, or 1.7 per cent, to close at 7,463.65, after slipping to as low as 7,434.28 points during trading earlier in the day.

Shares of Anglo Irish Bank slumped 47 cent, or 3.9 per cent, to €11.40, while Allied Irish Banks fell 50 cent, or 2.7 per cent, to €18.21. Bank of Ireland shares dropped 27 cent, or 1.9 per cent, to €13.70.

Stocks fell in major markets across the globe as record oil prices and Israel's incursion into Lebanon shook the confidence of investors. Crude oil rose above $76 a barrel for the first time, bringing the commodity's gain in the past year to 27 per cent, as violence in the Middle East and Nigeria posed a threat to supplies.

"It seems like there have never been so many geopolitical events happening at once. There are a lot of international sellers of Irish stocks trying to lock in some gains," one trader in Dublin said.

"These events are affecting investor sentiment and leading investors to go into safer havens," such as gold and bonds, he said.

The biggest percentage decline on the Iseq yesterday was posted by Abbey, after the house builder said pretax profits fell 18 per cent to €47.1 million for the year to the end of April. The company warned, too, that pressure on profit margins amid higher land prices was likely to affect earnings again later in the year.

Shares of other construction-related companies also fell. McInerney Holdings shed 44 cent, or 3.9 per cent, to close at €11, while Kingspan shares declined 15 cent, or 1.1 per cent, to €13.35.

Grafton Group fell 13 cent, or 1.2 per cent, to end the day at €10.55.