Investors had shrugged off nerves over the crisis in the previous session but as Barack Obama postponed part of an Asian tour to try to resolve the impasse, nervousness in markets rose.
Blue-chip shares in London fell sharply on the day though there was something of a recovery by the end of the session, as the FTSE closed down 22.5 at 6437.5.
Brenda Kelly, senior market strategist at IG, said: "Global markets are notably softer today, as yesterday's investor complacency is replaced with caution.
"With quarter-end and continuing uncertainty about the longevity of the US government shutdown, investors have resolved to take some profits."
In Europe, German's Dax and France's Cac 40 were down 0.7% and 0.9%, while on Wall Street, the Dow Jones Industrial Average shed 80 points in early trading.
On the currency markets, sterling held on to recent gains against the greenback, at 1.62 US dollars, while it was also flat against the single currency at 1.19 euros.
In London, tumbling half-year profits at Tesco sparked declines across the supermarket sector though Britain's biggest supermarket group had recovered most of its losses by the close.
The company saw a 24% drop in first half earnings to £1.39 billion as underlying sales declined. Shares fell 1.1p to 358p.
Rival chain Sainsbury's painted a brighter picture with a 2% rise in like-for-like sales, but its shares also dropped, down 4.9p to 385.3p.
Bradford-based Morrisons followed them into the red, down 5p to 274.8p as it also turned ex-dividend, meaning new investors will no longer be entitled to the latest shareholder payout.
Quality and safety solutions provider Intertek and property group British Land were also hit as they turned ex-divi, down 88p to 3266p and 4p to 577p respectively.
Elsewhere, shares in pawnbroker Albemarle & Bond suffered after it said it had failed to agree a deal with its biggest shareholder to underwrite a £35 million rights issue. It is in talks with lenders over how to avoid a breach of its lending terms this year. Shares lost more than half their value, down another 59% or 41p to 28p and have now fallen by more than 80% in the last year.
Domino's Pizza was one of the biggest gainers in the second tier after it reported 4% growth in UK like-for-like sales growth over its third quarter to September 29. Shares rose 21.5p to 610.5p.
The biggest risers on the FTSE-100 were National Grid, up 12p to 743p, Vedanta Resources up 15p to 1090p, Randgold Resources climbing 58p to 4396p and Anglo American up 18p to 1502.5p.
The biggest fallers on the FTSE-100 were Kingfisher down 12.6p to 376.9p, Coca-Cola HBC down 54p to 1771p, Intertek off 88p at 3266p and Smiths Group down 37p to 1382p.