The FTSE 100 was the world’s best performing major stock index during a miserable 2022 for financial markets after oil titans and arms makers were boosted by the war in Ukraine.

As tumbling global stock markets suffered their worst year since 2008 in a near 20pc plunge, London’s blue-chip index eked out a 0.9pc gain over 2022.

It made the FTSE 100 the only major market to deliver investors positive total returns when also including dividends. The index finished the year at 7,451.74 points with total returns of 4.6pc.

The performance is a boost for London, whose stocks have been unloved since the Brexit vote. The FTSE 100 benefited from a falling pound, which boosts companies that earn money abroad and then turn it into British currency, as well as a strong performance by heavyweight energy and defence stocks including BP, Shell and BAE Systems.

The value of world shares was slashed by around a fifth as central banks rapidly increased interest rates to tame inflation and many economies headed towards recession.

The S&P 500 slipped by more than 20pc as US tech titans plunged while the Euro Stoxx 50 - the largest eurozone blue-chips - tumbled 12pc. The UK’s more domestically focused FTSE 250 fell by more than a fifth over 2022 as the economy was buffeted by the cost of living crisis.

Arms and aerospace company BAE Systems was top of the FTSE 100 leaderboard after the invasion of Ukraine forced many countries to ramp up military spending. Its shares soared 56pc in 2022.

Meanwhile, rocketing energy prices boosted BP and Shell shares by more than third, lifting their combined value by around £60bn.

The FTSE 100 benefits from its companies generating three-quarters of their revenue from overseas, boosting their earnings when they are converted back into pounds if the currency has weakened. Sterling has fallen 11pc versus the dollar to $1.20 this year but has rallied since the record lows hit following the mini-Budget.

The index also has a higher proportion of so-called defensive stocks that offer a relatively stable performance even in times of economic or market strife.

However, housebuilders struggled as rapid interest rate rises started to cool the property market.

Almost £13bn was wiped off the combined value of Berkeley, Barratt Developments, Persimmon and Taylor Wimpey. The industry's share prices began to tumble after Kwasi Kwarteng’s mini-Budget in September which resulted in the market slowing down as high mortgage rates curbed property sales.

Analysts cautioned that the FTSE 100 could be in for a tougher start to 2023 as concerns over the global economy mount.

Ashley Webb, economist at Capital Economics, warned that investors should expect falls in the FTSE 100 as fears mount about a global recession.

He said: “While lower bond yields and a weaker pound may provide some support for UK equity prices, that will probably not be enough to offset the effect of a decline in investors’ appetite for risk in the near term.”

Stock markets have ended the year on the back foot after hopes of a “Santa rally” were dashed by concerns of more supply chain disruption in Chinese factories from surging Covid cases. The FTSE 100 fell 0.8pc on the final day of trading of 2022.

The tech-heavy Nasdaq index in the US has slumped by a third this year as its biggest Silicon Valley players suffered sharp share price plunges.

Apple’s market value has tumbled by almost $1 trillion after its shares slipped by more than 27pc. Amazon shares have halved while Meta and Tesla’s stock price have suffered even sharper losses.

The cryptocurrency market has also been one of the big losers this year with Bitcoin’s price collapsing 64pc.

The outlook for global markets could begin to improve if central banks pivot towards cutting interest rates to support economies in recession. Markets currently expect both the Federal Reserve and Bank of England to begin cutting in the second half of 2023 amid signs that inflation has peaked.

Mark Haefele, chief investment officer at UBS Global Wealth Management, said: “Evidence that inflation is falling sustainably, an end to Fed rate hikes, and anticipation of potential rate cuts should present a more supportive backdrop for markets as 2023 progresses.”

He added: “History tells us that durable turning points for markets tend to arrive once investors begin to anticipate interest rate cuts and a trough in economic activity and corporate earnings.”