THE FTSE 100 edged into the red after an optimistic start to trading was cut short by tensions over Iran and US-China trade concerns.
London's top flight closed 1.49 points lower at 7,573.85 at the end of trading on Tuesday.
The smaller UK markets made gains on the other hand, as UK-based multinational firms were particularly struck by worries over global trade.
David Madden, market analyst at CMC Markets UK, said: "European equity markets had a strong start to the session but the picture is looking less optimistic now, seeing as some indices are showing small losses, while others are only showing modest gains.
"Given the rebound didn't last too long, it suggests that nerves are still persisting amongst traders.
"It is in nobody's interest to start an all-out war, but at the same time, traders are wondering how the intensity of the situation can be dialled down."
The picture was similar across Europe's other key markets, where traders saw their spirits dampened after the US markets opened nervously as tensions over Iran remain fierce.
The German Dax decreased by 0.7% while the French Cac moved just 0.02% lower.
Across the Atlantic, the Dow Jones opened in the red as traders also showed caution over the signing of the US-China phase one trade deal next week.
Meanwhile, sterling was subdued but dipped against the strengthening US dollar.
The value of the pound decreased 0.27% versus the US dollar at 1.313 and rose 0.2% against the euro at 1.178.
Financial market analyst Fiona Cincotta said: "The pound pared gains from the previous session. With no high impacting UK economic data and Brexit headlines at a minimum, sterling is trading at the will of the stronger US dollar."
In company news, supermarket Morrisons closed higher despite posting falling sales over the crucial festive season, amid "unusually challenging" trading and shopper uncertainty.
The UK's fourth biggest grocery chain reported a 1.7% fall in group like-for-like sales, excluding fuel, for the 22 weeks to January 5, covering its third quarter and the key Christmas period.
Shares in the Yorkshire-based retailer were up 3.05p at 195.5p at the close of play.
Elsewhere, luxury car marker Aston Martin Lagonda continued its torrid year after floating on the London stock exchange.
The company saw its value sink further after it said that "challenging trading conditions" it flagged up in November have not eased and, as a result, it registered fewer sales, higher costs for selling each vehicle, and lower margins.
Shares in the company slid 85.8p to 435p on Tuesday.
Gambling giant 888 Holdings closed lower after warning that the market remains "challenging", despite cheering an all-time record high for monthly revenues in December.
It saw shares dip by 1.7p to 160p at the end of trading.
The price of oil nudged lower as the energy market cooled after huge surges over the previous two trading days.
The price of a barrel of Brent crude oil fell 0.56% to $68.04.
The biggest risers on the FTSE 100 were Ocado, up 54p at 1,325.5p, Kingfisher, up 8.4p at 228p, ABF, up 57p at 2,672p, and J Sainsbury, up 4.4p at 231p.
The biggest fallers on the index were NMC Health, down 177p at 1,494.5p, Standard Life Aberdeen, down 10.9p at 314.4p, Rentokil, down 10.1p at 442.4p, and Centrica, down 1.92p at 87.66p.
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