Update: The FTSE 100 has closed 64 points, or 0.9%, lower at 7,324, after a broad-based sell-off that saw only a handful of stocks escape the red as investors looked to safe havens.
The gold price jumped amid the bearish mood, briefly rising above $1,300 an ounce for the first time since November, before falling back to $1,290.
Terror attacks in Spain rattled investors, although travel stocks, which were the heaviest fallers as markets opened, pared some of those losses.
On the FTSE 250, Thomas Cook (TCG) recovered most of the morning's losses to close less than a penny down at 124.2p.
(10:32) Travel stocks weigh on FTSE
Airline stocks have fallen to the bottom of the FTSE 100 in a broad-based sell-off as investors reacted to terror attacks in Spain.
Thirteen people were killed and dozens were injured yesterday after a man drove a van into crowds on Las Ramblas. Spanish police later shot dead five suspected terrorists in the town of Cambrils after a second vehicle attack wounded seven.
Police said the men were linked to the Barcelona attack, for which Islamic State has claimed responsibility.
The FTSE 100 fell 66 points, or 0.9%, to 7,322 points, with travel stocks worst hit. British Airways owner International Airlines Group () fell 2.4% to 609p while EasyJet (EZJ) was down 2.1% at £12.74. Only a handful stocks escaped the red.
The slide in UK markets followed the worst single session in three months in the US yesterday. The Nasdaq dropped 2%, the S&P 500 was down 1.5% and the Dow Jones fell 1.2%, amid rumours Gary Cohn could resign as director of the national economic council amid the fallout from US president Donald Trump's response to the deadly Charlottesville riots.
'He is seen as the glue holding Trump's pro-business agenda together,' said Deutsche Bank's Jim Reid. 'The fears are if he goes you take a further step back from tax cuts and deregulation.'