At one time the FT-SE 100 index was nursing a 48.6 points fall and seemed destined to go even lower. But once New York got over initial hesitancy the stock market became more positive with the slide reduced to 28.5 (to 3,855.9) by the close.
The Iraqi confrontation put the spotlight on industries - largely airlines and hotels - which were savaged during the Gulf war when many travellers decided to stay at home.
British Airways, with the added worry of mounting pressure on its proposed American Airlines link, crash landed 12.5p to 512p. On the hotel front, Granada fell 16.5p to 849.5p, Bass 7.5p to 813.5p and Ladbroke 1p to 207.5p.
Oils lost some of their exuberance although crude prices continued to move ahead. Besides the increase in Middle Eastern tension, the United Nation's decision to postpone the food-for-oil deal, which would have allowed Iraq limited exporting opportunities, was again a influence in forcing the oil market higher.
Interest rate concerns were heightened by today's scheduled Ken and Eddie meeting. Despite the Chancellor's desire for lower rates it is thought he will for the time being bow to the more bearish stance of the Bank of England.
The near term direction of US rates could prove the decisive factor. The market is divided whether President Clinton will chance an increase ahead of the presidential election. If he does sit tight the Chancellor's room for manoeuvre is increased.
The latest fund management outcry prompted thoughts about a much tougher supervisory regime. If stories floating around about the composition of the suspended funds are true then portfolios had little relation to the apparent management guidelines.
British Biotech, rumoured to be one of the main investments, fell 3p to 218p (after 192.5p) and Stanford Rook, another alleged Morgan stock, gave up 12.5p to 472.5p.
On the surface it looked as though the market enjoyed a busy session. However, Government sales of National Power, PowerGen and Southern Electric helped swell volume. Through Goldman Sachs 28.5 million NP shares and 860,000 Southern went through and UBS handled the disposal of 17.1 million PG. The action dimmed the two generators, NP by 8p to 393p and PG by 8.5p to 495.5p but Southern managed a 2.5p gain to 665p.
Williams Holdings, one of the few conglomerates riding high, was little changed at 357.5p as Albert E Sharp made bullish noises ahead of next week's interim results. Suggesting profits of pounds 112m, the stockbroker observed the shares "now look poised to break out from the sector straight jacket and achieve genuine growth status".
Smith & Nephew, the healthcare group, gained 3p to 198p on suspected buying by Morgan Stanley and Tate & Lyle edged ahead 2.5p to 452.5p although more profit downgradings were signalled.
Iceland's poor display unsettled other food retailers and Farnborough produced modest gains for the aerospace contingent.
Avon Rubber, the tyres group, enjoyed a speculative run, up 22.5p at 710p, a 12 month high. Croda International added 25.5p to 338p after better-than-expected profits.
The Croda display directed attention to British Vita, up 9.5p to 204.5p.
With signs of a chemical upturn hopes are growing Monday's half-year figures will be accompanied by an encouraging trading statement. SBC Warburg has moved the shares from hold to add. Interim profits are likely to be around pounds 22m against pounds 26.2m. A year's out-turn approaching pounds 50m (pounds 35.7m) is the expectation being expressed in some quarters.
Telspec's latest profit warning sent the shares reeling 180p to 222.5p. They were 1,045p in November. Memory Corporation lost a further 13.5p to 24p.
Quality Software, the computer group, edged forward 2.5p to 257.5p. Its recent strength appears to be due to buying by the Bulldog Fund, an investment vehicle related to stockbroker Seligmann Harris. It has acquired nearly 4 per cent.
Millwall, the second-division football club, had to contend with more selling by director Jose Berarda. He has unloaded a further 5.5 million shares. His holding is 4.53 per cent against 12. 5 per cent earlier this year. The shares firmed to 3.5p.
rBCE, the computer games group, fell 1p to 13.75p, lowest for more than a year. The fall has occurred despite favourable presentations about AutoNomy, developing an Internet search system, where BCE has 8.3 per cent. At the half-way mark the computer group had lost pounds 1.2m and there are worries publishers may have delayed commitments to new games. There is also talk a sell note is being prepared by a stockbroker. The shares were 25p in November.
rLadbroke has emerged as a surprise 4.45 per cent shareholder in Wakebourne, the struggling computer group. It seems the betting and hotel group could have acquired its interest in December, 1994, when a company with a debt to Ladbroke went into receivership. Wakebourne held at 27.5p.