A $2bn (￡1.6bn) deal to buy North Sea oil engineer Wood Group has collapsed amid global market turmoil.

Dubai-based buyer Sidara stunned the market on Monday after walking away from the landmark deal, citing the recent rout in global shares and rising tensions in the Middle East.

The company said: “Sidara confirms that in light of rising geopolitical risks and financial market uncertainty at this time, Sidara does not intend to make a firm offer for Wood.”

Shares in Aberdeen-based Wood, which offers outsourcing services to major North Sea producers, slumped 37pc to 123p after Sidara ended its pursuit.

Sidara traces its roots back to an engineering firm set up in Beirut, Lebanon, in the mid 1950s by Jordanian politician and businessman Kamal Al-Shair. His son, Talal Shair, is current chairman and chief executive.

The Middle East has been beset by tensions owing to the ongoing Israel and Palestine conflict, which has stoked concern in the region.

Coupled with a sapping in confidence in financial markets, Sidara said it was ending its pursuit.

The FTSE 100 suffered its worst decline in a year on Monday amid concerns slower US economic growth will prompt a recession. The blue chip index fell as much as 2.5pc to its lowest level since April and the worst day since March 2023.

The mid-cap FTSE 250 index, where Wood Group is listed, declined by 3.5pc, making it the worst day for the index since September 2022.

It marks the end of an 18-month takeover pursuit for Wood by two different companies. Sidara made a 230p per share offer in May having been rebuffed by Wood’s chairman Roy Franklin and his board on three previous occasions.

The offer was a 52pc premium to Wood’s share price before the bid. The board managed to force Sidara to hike its offer from the original 212p bid in May.

Wood has been the subject of intense takeover offer activity, with a prior offer from private equity firm Apollo also collapsing last year after the parties walked away.

Wood sought to reassure nervous investors by promising to hit its ambitious free cash flow targets for 2024 and 2025.

It said: “The board remains confident in Wood’s strategic direction and fundamental prospects.

“The board is grateful for the substantial engagement of its shareholders and the support of its clients and employees throughout this process.”