LONDON, England (Reuters) -- Oil slipped more than $1 to below $76 a barrel on Thursday after Britain said it had thwarted a plot to blow up an aircraft in trans-Atlantic flight, triggering falls in stock markets and a rise in safe haven bonds.
U.S. oil fell as much as $1.25 to $75.10 on the news, and was trading at $75.30 a barrel at 1420 GMT. London Brent crude was down 88 cents at $76.40, off its $76.05 session low.
Britain and the United States stepped up security and London's Heathrow airport ground almost to a standstill.
The news reined in oil prices that had risen to record highs this week on BP's decision to throttle back output at its Prudhoe Bay oilfield in Alaska, the biggest in North America.
"There is more risk in the world. At times of heightened uncertainty people sometimes become more risk averse and it sparks a broader sell-off," Craig Pennington, energy portfolio manager at Schroders in London, said of the price move.
"The energy sector is trading broadly in line with the markets, it points to across the board selling."
Dariusz Kowalczyk, senior investment strategist at CFC Securities in Hong Kong, said oil demand would suffer if Thursday's events led to a downturn in consumer confidence.
"After 9/11 prices rose because people were thinking about supply stability. However, later on oil fell because people said consumer confidence will fall and global growth will slow. After this UK consumer confidence may decline, which will be negative for growth in the UK and beyond, which may affect oil demand."
Equity markets also fell as investors sought the safe haven of government bonds. Sterling dropped against the dollar.
"The initial reaction was something of a sell-off on fears of what this will do from an oil demand standpoint. That's the big unknown," said Chip Hodge, managing Director at John Hancock Financial Services, a Boston-based energy portfolio manager.
U.S. gasoline was down 3.3 percent from Wednesday's close and heating oil was down 2 percent. Prices on the Amsterdam-Rotterdam barge market were also sharply down, with gasoline off nearly 5 percent.
"This is only going to have a temporary effect. The attempt was foiled at least for now. I don't think we're going to have a structural change," said Olivier Jakob, an analyst at Swiss-based Petromatrix.
Bank of America saw a risk of reduced oil demand but added: "Higher fear of terrorism can also exacerbate the security of supply premium in the oil market. Following BP's shut-down of Prudhoe Bay global spare capacity rests at about 1.5 million barrels per day, less than third of what we deem appropriate to balance the market. Continued risk for Hurricanes and a deadline for Iran on nuclear proliferation should keep concerns high."
Oil prices earlier had been drifting sideways after U.S. data on Wednesday showed an unexpectedly deep draw in gasoline and crude inventories in the world's top consumer.
The Energy Information Administration data does not include the partial closure of Prudhoe Bay, which accounts for 8 percent of total U.S. output.
BP began shutting the field on Sunday after finding a corroded pipe. It has closed about half of the 400,000 barrel-per-day production and will make a decision on Friday whether it can keep the Western half operating.
Data on Thursday showed crude imports to China, the world's second biggest consumer, fell to their lowest level in 11 months in July. But at the same time imports of refined products were 137 percent above year-ago levels.
"From all the indications demand appears quite healthy there," Hodge said.
Oil has soared 25 percent this year on supply disruptions in Nigeria and Iraq, the dispute over Iran's nuclear program and the war in Lebanon.