Oil prices also jumped by more than 1% to $105 a barrel in New York as Russia's military advance into Ukraine raised fears of economic sanctions against one of the world's major energy producers.
The risk-averse stance of markets meant only six top flight stocks were in positive territory, with mining giant Rio Tinto among those lower after a fall of 82p to 3350.5p. The FTSE 100 Index was down 101.3 points at 6708.3, while the Dax in Frankfurt and Cac in Paris were more than 2.5% lower.
In Russia, markets dropped by as much as 10% and its currency fell to its lowest point ever against the dollar and the euro because of the crisis. Sterling held its own against the greenback and euro - at 1.67 and 1.21 respectively - following stronger than expected manufacturing figures.
Oil giant BP, which holds a large stake in Russian oil company Rosneft, was down 2% or 11.5p to 492.9p, despite the surge in oil prices.
With investors retreating to defensive asset classes such as gold, shares in mining company Randgold Resources rose by 4% or 206p to 4953p and African Barrick Gold up 14.1p to 295.3p.
Energy company SSE also fared well initially as its exposure to renewable power generation was seen as a potential hedge against any future impact on the flow of Russian gas supplies. Its shares were up for much of the session but eventually closed 7p lower at 1396p. Coal-fired power station Drax was 1.5p higher at 807.5p.
Financial stocks were lower on fears that credit lines in eastern Europe could dry up if the tensions involving Russia continue. Amid the general flight from riskier assets, Royal Bank of Scotland was off 6.3p at 321.6p and insurer Aviva slipped 13.7p to 459.9p.
Iron ore company Ferrexpo, which has mining operations in Ukraine, was 7% lower, off 11.6p at 141.4p near the bottom of the FTSE 250 Index. Other companies with exposure to the country include steel company Evraz, which dropped 8.9p to 61.1p.
Elsewhere, shares in advertising giant WPP continued to fall in the wake of last week's warning that competitive pressures were becoming "more intense". It was off another 54p to 1254p.
Chocolate box retailer Thorntons was 3.75p higher at 157.25p after it reported a 47% jump in half-year profits to £7.2 million. The retailer benefited from strong Christmas trading and said it looked forward to the key spring seasons of Mother's Day and Easter with confidence.
The biggest FTSE 100 risers were Randgold, Fresnillo ahead 18.5p at 970p, Pearson up 10p at 1023p and Intertek up 29p at 2970p.
The biggest fallers were William Hill down 19.1p at 378.5p, Schroders Voting off 124p at 2589p, Aberdeen Asset Management off 16.9p at 373.7p and WPP.