Oil prices fell sharply to below $100 a barrel Friday after a massive earthquake and tsunami struck Japan, the world’s third-largest oil consumer, triggering knee-jerk sell-offs across financial markets.

The magnitude 8.9 earthquake slammed Japan’s northeastern coast in the afternoon there, unleashing a 23-foot (7-meter) tsunami, killing at least 40 people while 39 are missing. Regions as far as Hawaii and Alaska were bracing for damaging waves to hit their own coasts.

Fires triggered by the quake were burning out of control up and down Japan’s coast, including one at an oil refinery.

By early afternoon in Europe, benchmark crude for April delivery was down $2.82 to $99.88 a barrel in electronic trading on the New York Mercantile Exchange. The contract lost $1.68 to $102.70 on Thursday.

In London, Brent crude was down $2.86 at $112.57 a barrel on the ICE futures exchange.

Japan’s benchmark Nikkei 225 stock index fell 1.7 percent Friday while Hong Kong’s Hang Seng index dropped 1.6 percent.

"After China and the U.S., Japan is the world’s third biggest consumer of commodities," said a report from Commerzbank in Frankfurt. "Japan’s daily oil consumption in 2009 was 4.4 million barrels and this has to be covered virtually in full by imports. The demand for oil could be lower, at least temporarily, because of the earthquake."

Traders are also eyeing protests in Saudi Arabia for signs they could escalate and potentially hamper production in the world’s largest crude exporter.

"Fighting continues in Libya but we think that a full interruption of Libya exports is now priced in and markets will react more to Saudi than to Libya headlines," said analyst Olivier Jakob of Petromatrix in Switzerland.

On Thursday, Saudi police attacked a protest by minority Shiites in the eastern city of Qatif. Shiites, who account for about 10 percent of the kingdom’s 23 million population, have protested for two days demanding the release of political prisoners.

Pro-democracy activists have called for protests on Friday in the capital, Riyadh, to demand reforms to the monarchy. Public demonstrations are banned in Saudi Arabia.

Investors are sensitive to any sign of upheaval in Saudi Arabia because the OPEC leader has been using its spare capacity to make up for output lost amid the violent uprising against Libya’s government.

"Production losses of a good one million barrels a day in Libya are currently being compensated by Saudi Arabia," Commerzbank said.

When news broke that Saudi Arabian police fired shots to break up the protest Thursday, prices soared $3 in just 12 minutes.

"Our biggest fear has been that the unrest infecting the Middle East would surface as violence or bloodshed in Saudi Arabia," Cameron Hanover said in a report. "If protests start to create martyrs in Saudi Arabia, then it could be the beginning of the end."

In other Nymex trading for April contracts, heating oil was down 4.93 cents at $2.9956 a gallon and gasoline dropped 5.96 cents to $2.96 a gallon. Natural gas fell 2.3 cents to $3.853 per 1,000 cubic feet.