Unrelenting concerns over the prospects for war in Iraq and heightened security worries kept markets on the slide yesterday.

A new taped broadcast by Osama bin Laden exhorting Muslims to fight against a US-led attack on Iraq, coupled with news that the US had deployed anti-aircraft missiles around Washington, compounded the deepening sense of insecurity.

"With ... tanks at London's Heathrow ... and anti-aircraft missiles around Washington, it becomes a more visible way of crystallising the fears that have been around," said BNP Paribas European equity strategist Mr David Thwaites.

Wall Street increased its losses in afternoon trade as blue-chips fell to four-month lows. The Dow closed down 84.94 points or 1.08 per cent at 7,758.17

European blue-chips closed lower, tugged down by car stocks after a bleak outlook from France's Renault. Insurers fell after credit rating agency Standard & Poor's cut its ratings on French insurer Axa's debt because of lower earnings growth last year and diminished capital.

Europe's food and beverage sector was also under pressure after British confectionery and soft drinks group Cadbury Schweppes warned of flat 2003 earnings at its US soft drinks unit DPSU.

The FTSE Eurotop 300 index was down 1.78 per cent at 774.33 points - within seven points of its lowest level in nearly six years - with decliners eclipsing advancers by almost five-to-one. The narrower DJ Euro Stoxx 50 index lost 2.45 per cent to 2,136.60 points.

In Dublin, stocks closed down 0.87 per cent on 3,845.80 as the market struggled to find buyers. The FTSE 100 index was on the back foot from the outset, eventually closing a net 53.1 lower at 3,616.1. On the continent markets in France and Germany gave up more than 2 per cent.

There was little move in currency markets with the euro marginally stronger against both the dollar and sterling, which suffered little from the Bank of England's quarterly inflation report.

Oil prices held strong near two-year highs after the US government said national crude inventories had slumped to their lowest level in 27 years. US light crude gained 33 US cents to $35.77 a barrel in New York, or about 1 per cent, while London Brent rose eight US cents to $32.45.