In the past week, a tide of black fuel spewing from a sunken oil tanker has prompted the closure of three of the resort's most popular beaches. Spanish authorities said they had sealed the leak in the tanker Don Pedro, which sank after hitting a rocky islet on Wednesday laden with 200 tonnes of fuel oil and gasoil. But this weekend workers were still shovelling up more than 25 tonnes of black oil that came ashore and environmentalists warned of another slick threatening the coast.

The disaster comes on top of the closure last month of three top dance clubs, Amnesia, Bora Bora and DC-10, following a crackdown on an alleged culture of drug-taking by police. The clubs can attract up to 7,000 revellers a night during high summer as the island becomes the world's clubbing capital.

In previous years the island's drug culture has shown signs of spinning out of control, with shootouts between rival British drug trafficking gangs last summer injuring two British bystanders.

Amnesia has now reopened and Bora Bora and DC10 expect shortly to resume business, but there was more bad news for the holiday industry last week when 4,000 tourists were evacuated from the island's airport after planes were grounded following a suspected bomb threat by the Basque separatist group Eta, which turned out to be a false alarm. Security services say they have foiled five terrorist operations in Spain by Eta in the past month, but are braced for more attacks in Mediterranean holiday resorts.

Images of white-overalled salvage workers clearing spilt oil from pristine beaches recalls Spain's worst environmental disaster five years ago, when the Prestige oil tanker broke up and deposited thousands of tonnes of oil on the coastline of Galicia in north-west Spain.

Don Pedro's cargo is much smaller, but the Ibiza authorities have been similarly criticised for their slow response. Spain's public works minister, Magdalena Alvarez, insisted on Friday that the situation in Ibiza was "not a catastrophe". But hoteliers reported a stream of cancellations following the closure of the beaches of Talamanca, Figueretas and Playa de Bossa.

Ibiza's chamber of commerce met yesterday to decide how to confront a possible collapse of business.

Despite red flags flying, determined holidaymakers continued to seek out unsullied patches of sand to place their towels and watch the clean-up operation. More than three miles of barriers have been strung along the shoreline designed to absorb tonnes of black crude spreading across the sea surface.

Ibiza became a mecca for clubbers in the late 1980s when two English DJs, Trevor Fung and Ian St Paul, opened the Project bar in San Antonio. DJs such as Paul Oakenfold and Danny Rampling were soon visiting. The number of clubs exploded as the UK's illegal rave and ecstasy culture expanded. Venues such as Cafe del Mar, Eden and Es Paradis gained a large following. An indie rock scene is now developing with Arctic Monkeys and Kasabian due to appear at San Antonio.