Samsung Electronics scrapped production of its doomed Note 7 smartphone on Tuesday, sparking a fresh collapse in its share price, as global markets struggled to maintain an oil-fuelled rally.

Stock in the world's biggest smartphone maker tumbled eight percent, sending Seoul stocks sliding 1.2 percent after it told customers to stop using their Galaxy Note 7 devices and called a halt to worldwide sales, as US officials warned the handsets could blow up.

The group halted production on Tuesday and then announced it was scrapping the model, once markets had shut in Asia. Consumers with Note 7s were advised by Samsung to power down and stop using them.

The announcement came a little over a month after Samsung announced a recall of 2.5 million Note 7s in 10 markets following complaints that its lithium-ion battery exploded while charging.

"The group's flagship handset has turned out to be worse than a dud -- it is a dangerous fire risk," City Index analyst Ken Odeluga told AFP. 

- 'Incendiary effect' -

"This incendiary effect has spread to Samsung's shares.

"After last week clawing back September's double-digit losses, the stock wiped out three weeks of progress with today's eight-percent fall."

Odeluga added that Samsung had a big impact on sentiment because of its huge market capitalisation of more than $200 billion (179 billion euros).

"It is a key weight of many Asia-Pacific equity market indices. If Samsung catches a cold, so do the region's equities."

The crisis has turned into a PR disaster for the company and the situation only worsened when reports emerged a week ago of replacement phones also catching fire.

Samsung shares had already fallen 1.5 percent Monday on reports it was suspending production of the device.

Analysts noted fierce rivals like US giant Apple -- the second biggest smartphone maker -- and challengers such as China's Huawei would benefit in the short term.

"Samsung shares have fallen sharply today, but the company is still trading not too far off a record high, which shows that despite problems with its smartphone design, this is only one line in its gigantic electronics empire," said Laith Khalaf at stockbroker Hargreaves Lansdown.

"This is undoubtedly a blow for Samsung, but the reputational damage to the company is not of the same scale of the emissions rigging scandal for Volkswagen or the Gulf of Mexico disaster for BP, thankfully because no-one has been hurt.

"Competitors might now enjoy a short term boost to sales."

- Oil rally stalls -

Elsewhere, oil prices dipped after soaring Monday in response to comments from President Vladimir Putin that Moscow was ready to align with OPEC's push to limit output and address a supply glut.

His comments came as Saudi Energy Minister Khalid al-Falih predicted prices could rise further, having been under pressure since mid-2014 on the supply glut, overproduction and weak demand.

Big-name energy-linked firms jumped in Wall Street and their counterparts in Asia initially followed suit before the rally lost steam.

The International Energy Agency warned Tuesday that the glut may weigh on world markets deep into next year -- unless the OPEC producer cartel makes good on its promise to cut output.

Back in Europe, the London stock market held close to a record peak, partly on the weak pound which boosts exporters. The FTSE 100's all-time high is 7,122.74 points, set on April 27, 2015.

- Key figures at 1030 GMT -

London - FTSE 100: UP 0.1 percent at 7,107.20 points

Frankfurt - DAX 30: UP 0.1 percent at 10,638

Paris - CAC 40: UP 0.2 percent at 4,507.90 

Tokyo - Nikkei 225: UP 1.0 percent at 17,024.76 (close)

Seoul - KOSPI: DOWN 1.2 percent at 2,031.9 points (close)

Hong Kong - Hang Seng: DOWN 1.3 percent at 23,549.52 (close)

Shanghai - Composite: UP 0.6 percent at 3,065.25 (close)

New York - DOW: UP 0.5 percent at 18,329.04 (close)

Pound/dollar: DOWN at $1.2294 from $1.2362

Euro/pound: UP at 90.41 pence from 90.09 pence

Euro/dollar:  DOWN at $1.1113 from $1.1137

Dollar/yen: UP at 103.87 yen from 103.62 yen

Oil - West Texas Intermediate: DOWN 45 cents at $50.90 per barrel

Oil - Brent North Sea: DOWN 25 cents at $52.89

Source: AFP