Stock markets around the world were convulsed yesterday as investors scrambled to understand the implications of Dubai World's restructuring and unexpected debt standstill.

The lack of information about Dubai's flagship government-owned holding company, made worse by a religious holiday in the Middle East, prompted indiscriminate selling of stocks linked to the region. The cost of insuring against default in emerging markets around the world also leapt.

“In the absence of definitive information it's hard to see the market treating this as an isolated one-off,” said one trader.

With trading volumes low because of the Eid holiday and the US Thanksgiving break, investors moved into safer assets pushing up prices of traditional havens such as government bonds.

Yields on German 10-year bunds, the benchmark for Europe, fell 10 basis points to 3.16 per cent while equities were battered. The pan-European FTSE Eurotop 300 fell 3.2 per cent while in London, the FTSE 100 dropped 3.18 per cent, its worst one-day fall in almost eight months.

Financial stocks were the worst-hit sector, dropping 5.3 per cent as investors rushed to quantify their exposure to Dubai and the wider region. Barclays shares fell 8 per cent to 291.1p. Investors said the lack of information about the debt standstill, announced on Wednesday, was the key factor sparking the wider turmoil. But DP World, one of the world's top port operators controlled by Dubai World, said it was excluded from the restructuring.