Three Household Cavalry soldiers and a member of the public were hospitalised, vehicles were damaged and shocked passers-by stared in disbelief as some of the frightened animals galloped for five miles through central London before being stopped.
A white horse was soaked in blood after colliding with a vehicle as it bolted along the roads.
Management consultant Tula, 28, was on a bus near The Strand when she saw the "gruesome" sight and said it felt like a "weird dream".
She said: "Two horses went flying past. One black, one white.
"The white one was drenched in blood from the chest down and they were galloping through the traffic at speed. People were stopping in the street, shocked. The horses...seemed terrified."
The animals, from the Army's Life Guards regiment, part of the Household Cavalry, were spooked as they passed down Wilton Crescent in exclusive Belgravia.
Ironically they were on a routine exercise called the Watering Order - designed to expose parade horses to traffic and high-pressure environments when the sound of concrete hitting the ground on a building site set them off.
Six soldiers and seven horses were taking part in the exercise.
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