An economic chill blew through the art world yesterday when a rare painting of Francis Bacon by Lucian Freud sold for £1.6 million less than expected. The unfinished portrait, one of only two Freud painted of his friend and fellow artist, was predicted to go for at least £7 million at the auction at Christie's last night. The only other painting by Freud of Bacon was stolen in Berlin in 1988, making the one sold yesterday even more desirable.

But in a sign of the frail financial climate, the sale netted only £5.4 million, perilously close to the auction house's low estimate of £5 million. In contrast, Freud's Benefits Supervisor Sleeping sold for £17.2 million in May, the highest price paid in an auction for a work by a living artist. The poor sale is likely to be seen as the canary in the coalmine in the art world - a clear warning that the market may be about to blow.

On Friday, a Sotheby's auction of contemporary art raised £22 million, far below the pre-sale estimate of between £31 million and £43 million. A spokesman for the London auction house said that it was pleased with the results but admitted that “the sale was assembled in a very different economic climate from that which prevailed today.”

Even Andy Warhol, seen as one of the safest artists of the 20th century, failed to achieve his estimate. A series of skulls expected to fetch at least £5 million went for £4.3 million.

With both Christie's and Sotheby's due to stage key November sales in New York, experts fear that plunging stock prices, oil prices and the broader effects of the credit crunch could see the end of the art market boom. There are rumours that buyers reneged on their bids at the Damien Hirst sale last month, and both Sotheby's and Christie's have let it be known that they are not offering any credit.

Art consultancies in New York are apparently being offered pieces at the sort of discounts that would not have been countenanced just a few months ago. At last week's Frieze art fair in London, long regarded as a trusty indicator of the health of the contemporary art markets, the mood in some quarters was sour.

“There is a lot of apprehension in the trade,” said Charles Dupplin of the art insurance company Hiscox.

“You could fire a cannon down the aisles this year and not hit anybody,” a dealer at the fair added. Top-end works have recently been fêted as a relatively safe bet compared with the turbulence gripping other investments, but the severity of falls in the value of equities, oil, property and other assets has left art - particularly contemporary pieces - vulnerable to a significant downward correction.

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