Sliding oil stocks hit the FTSE 100 Index as prices hit new four-year lows after Opec ministers decided not to take action to cut production.
BP, Royal Dutch Shell and Petrofac were among the fallers while airlines were on the rise as the top-flight fell 5.8 points to 6723.4.
The cost of Brent crude dipped close to 71 dollars a barrel, nearly 40 per cent below its level in June.
This followed the decision from the Opec cartel after a meeting in Vienna.
Saudi Arabia, which dominates the 12-member organisation, had argued to keep the status quo.
The country's oil minister Ali Naimi had said that the market would eventually "stabilise itself".
In London, exploration firm Tullow Oil led the fallers' board with a drop of seven per cent, or 36.1p, to 464.9p.
Oilfield services firm Petrofac, which issued a profits warning on Monday that knocked a quarter off its value, came under further pressure as its shares slipped by another six per cent, or 56p, to 843.5p.
BP was down 11.7p to 426.2p, Royal Dutch Shell lost 101p to 2265.5p and BG Group dipped 62.8p to 986.7p.
Travel stocks were cheered by the oil price fall, with easyJet up six per cent, or 88p, to 1633p and British Airways owner International Airlines Group ahead 21p to 457.8p.
Sterling came under pressure with the plunging oil price likely to drive UK inflation down further - with it already expected to dip below one per cent over the next few months.
The pound was a cent lower against the greenback at just over 1.57 US dollars.
It was also down against the single currency at just under 1.26 euros.
Elsewhere, Germany's Dax was ahead on encouraging economic data and hopes of more economic stimulus.
Meanwhile France's Cac 40 also climbed.
In London, Sainsbury's dropped after a broker downgrade from Shore Capital, which said the grocer was set for a period of sustained earnings-per-share decline as it pours money into staying competitive in the embattled sector.
Shares fell 5.1p to 233.9p.
Fellow supermarket rivals also fell with Tesco sliding 1.6p to 185.6p.
Meanwhile Morrisons dipped 2.9p to 178p.
Stagecoach's success in securing the East Coast rail franchise along with joint venture partner Virgin triggered a big rise in its share price on the day.
The FTSE 250 Index stock surged eight per cent or 30.4p to 400.4p as the award from the Department for Transport meant that from next year it will be running the UK's two main London to Scotland rail routes.
In the wake of the rail franchise award, shares in unsuccessful bidders National Express and Aberdeen based FirstGroup were 16.6p higher at 257.4p and 2.1p stronger at 110.1p respectively.
FirstGroup shares were initially down by six per cent as the announcement extended its run of franchise disappointments which has also seen it lose the 10-year Scotrail contract, which it has operated since 2004, as well as the Caledonian Sleeper.
But the shares bounced back as analysts said many had already priced in the failure after weekend reports that the firm would lose out.
The prospect of lower fuel costs boosted shares in airlines, with easyJet and IAG the top FTSE risers, up 5 per cent and 4.5 per cent respectively.
The two airlines, which fly from a number of Scottish airports, were also boosted by expectations that the Scottish Parliament may use potential new powers to slash taxes on airline passengers.
"If Scotland does slash the (duty) for outbound Scottish flights it should ... create a competitive advantage for airlines using Scottish airports," said David Papier, a trader at ETX Capital.
Among single stocks, Smith & Nephew, a manufacturer of medical devices, climbed 2.7 per cent on speculation that US firm Stryker was targeting it for a takeover.
The biggest risers in the FTSE 100 Index were easyJet, up 88p to 1633p, International Airlines Group up 21p to 457.8p, TUI Travel up 15.8p to 433.3p and ITV up 5.7p to 212.9p.
The biggest fallers in the FTSE 100 Index were Tullow Oil down 36.1p to 464.9p, Petrofac down 56p to 843.5p, BG Group down 62.8p to 986.7p and Weir Group down 98p to 1960p.
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