Ferrari's Kimi Raikkonen finished a close second, with teammate Vettel third against expectations after a grid penalty had demoted him to sixth on the grid. I tried to manage, I could see my tyres opening up. Daniel Ricciardo finished eight tenths adrift of Vettel in P5, but team mate Verstappen, hoping for an incident-free session after his RB14 crawled to a halt towards the end of FP1 after suffering a gearbox failure, ended up without a time after losing the rear of his vehicle at Luffield with less than 20 minutes on the clock.
"I just have the feeling that this is a hugely significant session", said Sky F1 commentator David Croft.
Hamilton and Mercedes teammate Valtteri Bottas both did not finish the race.
Red Bull chief Christian Horner described the crash as "annoying" and "irritating".
"We've always said that we have very clear rules and that's what we go by since I've been in this team", he said. The main reason was Mercedes' tactical blunder, which saw them staying out during the Virtual Safety Car while everyone else behind them dove in for a stop.
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Verstappen went on to control the race once Mercedes' failure to pit Lewis Hamilton under the early virtual safety vehicle, caused by Hamilton's team-mate Valtteri Bottas's retirement from second place, cost the Briton track position later on.
Sebastian Vettel believes Formula One's penalty system needs to be more flexible after he lost three grid positions and a potential race victory at the Austrian Grand Prix. I feel I have the best strategy team behind me.
Sixth place went to Force India's Esteban Ocon, while his team-mate Sergio Perez finished seventh.
Renault's Nico Hulkenberg was the first retirement, with his engine spewing a cloud of smoke and flames. He did it in his first race for us in Barcelona, if you remember. He eventually pitted on lap 25, which dropped him down to fourth place. I can't predict what will happen but that's not getting in my way'.
Asked about the penalty ahead of this weekend's British Grand Prix, Vettel said the FIA's desire to deliver consistent punishments has led to too much scrutiny of every on-track incident. "I'm going to keep it free because I'm going to be in Russian Federation that day, supporting them". Verstappen had slight blistering, but Hamilton's left rear was a mass of blistered rubber.
"It's the same as every year really but the British Grand Prix is the most special in the sense of all the races that we get to do for me", said Hamilton in the Thursday press conference.