Power giants Centrica and SSE saw shares tumble after Ed Miliband's vow to freeze household energy bills spooked markets.
The reaction to the Labour leader's conference speech was fuelled by Centrica's warning that such a move could mean it is not viable for the firm, or any other energy supplier, to operate in the UK.
The energy sell-off was accompanied by more uncertainty from the United States as the FTSE 100 Index slipped 19.9 points to 6551.5.
The US government will reach its debt ceiling by Tuesday unless Congress raises the limit, raising fears over the impact that the failure of talks will have on confidence in the world's biggest economy.
In New York, the Dow Jones Industrial Average was flat in early trading and it was a similar story on European bourses.
On the currency markets, the pound was up one cent against the dollar at 1.61 US dollars after CBI data showed retail sales up, though it was flat against the euro at 1.19 euros.
Back in the FTSE 100, stocks moved on Labour's energy plans to impose a cap on business and consumer energy bills until January 2017, which analysts said could cost companies £4.5 billion.
Shares in the sector had held firm in the wake of Ed Miliband's announcement at the Labour party conference but a day later traders were digesting the stark tone of the Centrica statement and fears the freeze could jeopardise investment and threaten future supplies.
Centrica shares were 5% lower, off 21.1p to 375.6p, while Southern Electric and Swalec owner SSE dropped 91p to 1489p, closer to 6%.
For the second session in a row, Costa and P&O Cruises firm Carnival was sharply lower after a cut in profits guidance yesterday.
Chief executive Micky Arison admitted that the Costa business needed longer to recover from last year's Concordia capsizing, which left 32 people dead. Shares had fallen 6% in the previous session and were again off by a similar level, down 152p to 2106p.
Royal Bank of Scotland shares climbed during a strong session for the financial sector. RBS was 4.8p higher at 372.7p, Barclays rose 1.6p to 273p and Lloyds Banking Group added 0.9p to 75.1p.
Shares in BAE Systems also took off on speculation that the defence company is in the running for a £5 billion South Korea jet fighters deal. The blue-chip stock lifted 2% or 10.4p to 461.3p.
Meanwhile, shares in Laura Ashley tumbled 9%, or 2.25p, to 24p, after it reported a sharp drop in half-year profits.
The sofas-to-wallpaper group blamed the summer heatwave and spring freeze for six months of deteriorating performance, with like-for-like sales falling 2.2% and pre-tax profits dropping 11% to £7.4 million. The biggest FTSE risers were Fresnillo, up 35p to 1006p, Travis Perkins up 38p to 1661p, and International Airlines Group up 7.5p to 340.5p.
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