World markets followed Tokyo's Nikkei index into the red as shares suffered further declines in the wake of the Japanese earthquake disaster.
London's FTSE 100 Index closed nearly 1% lower, down 53.4 points to 5775.2, having held its nerve for most of the day until a late-session sell-off sparked by heavy falls on Wall Street.
The Dow Jones Industrial Average in America dropped more than 140 points in early trading, while markets across Europe also fell despite a weekend agreement over a broad package of measures to ease the eurozone debt crisis.
The pound fought back from near-four month lows against the euro, later standing 0.3% higher at 1.16 euros as it firmed against most currencies. Sterling edged 0.6% higher to 1.62 dollars.
There were significant losses for some of Japan's leading companies amid fears about the economic impact of Friday's disaster, including power shortages that could disrupt factory output. Car makers were badly affected with Toyota down 8%.
Oil prices fell on expectations that weaker Japanese economic output will depress demand for crude. The price of Brent crude dropped to around 113 US dollars a barrel, while the price of oil futures on the New York Mercantile Exchange was below 100 US dollars a barrel at one stage.
However the price of liquefied natural gas (LNG) for summer delivery has leapt 7% since Friday to 65 pence a therm - the highest since October 2008 - as fears mounted that imports to Britain would be hit as cargoes are diverted to stricken Japan following its earthquake and nuclear crisis.
The spectre of higher gas prices saw shares in London alternative energy stocks jump higher, with coal-fired UK energy producer Drax soaring as much as 7% at one stage. It later stood 12.4p higher at 408.7p, a gain of 3%.
Gas exploration giant BG Group was also higher, up 4% or 54p at 1514p, as wholesale gas prices rose. Other risers included temporary power supplier Aggreko, which climbed 8% or 116p to 1523p on expectations that its generators will be in demand throughout Japan.
But energy and mining engineering company Amec, which provides services to the nuclear sector, suffered a 3% drop, down 37p to 1115p.
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