LONDON -- The violence in Libya, which has effectively split the country into two, dominated markets again Thursday, sending stocks lower and oil prices even further above $100 a barrel. With reports indicating an escalation in the violence in and around the capital city of Tripoli, now that large parts of the country are in the control of opposition groups, there are fears that longtime leader Moammar Gadhafi may be preparing for a final showdown. The chaos has disrupted the North African country's oil output -- Libya produces about 1.6 million barrels of crude per day and has the biggest oil reserves in Africa -- and stoked worries that other bigger producers, such as Saudi Arabia, could face protests of their own. So far this year, the longtime leaders of Tunisia and Egypt have already had to quit following massive popular uprisings. Unsurprisingly, oil prices have surged over the past week, hurting stocks. In London, Brent crude for April delivery was up another $2.88, or 2.6%, at $114.13, while the New York rate rose another 2% at over $100 a barrel. The New York contract has soared an astonishing 20% over the past week. "Clearly this spike in the price of oil, unless it is just temporary, could well have quite an unfavorable affect on the global recovery process," said David Buik, markets analyst at BGC Partners. Fears that the global recovery from recession may come to an abrupt halt amid sky-high oil prices have weighed on stock markets all week, especially at a time when inflationary pressures are mounting. Stagflation -- the combination of rising inflation and lower growth -- is hardly a condition investors were dreaming about as they chased a number of stock indices up to their highest levels since the summer of 2008. "Further price increases are likely to put a serious dent in the global economic recovery and could, in a worst case scenario, potentially kick-start double-dip recessions on both sides of the Atlantic," said Will Hedden, a sales trader at IG Index. In Europe, the FTSE 100 index of leading British shares was down 0.2% at 5,909 while Germany's DAX fell 1.1% to 7,117. The CAC-40 in Paris was 0.2% lower at 4,006.