The FTSE 100 closed below 7,000 points for the first time since March after a late afternoon crash pushed it into the red.
After what had appeared to be a day of much-needed calm across British markets, the index lost heavy ground shortly before markets closed.
By the end of the day, the FTSE 100 had closed down 0.5% to 6,984.59, a fall of 36 points, and the pound was a little higher than where it started.
Sterling was up 0.8% to a little under 1.08 dollars by the time markets closed in London. It is above the all-time lows hit on Monday, but still down dramatically from last week.
Natural gas prices soared as evidence appeared to suggest a sabotage attack on two gas pipelines connecting Russia to Europe.
Initial reports of leaks off the coast of Denmark on Monday were confirmed by Danish authorities, who released dramatic footage of the gas bubbling up from underneath the sea.
There appear to be three big holes in the two pipelines – Nord Stream 1 and Nord Stream 2. The holes are many miles apart. Swedish seismologists recorded what appear to be two loud explosions shortly before the leaks were discovered.
Experts said the distance between the three leaks and the fact both pipelines had been hit made it highly unlikely to be an accident. There was no earthquake or other event which could have caused a natural explanation for the leaks.
However, the impact on gas markets was limited. This means that gas is unlikely to come by those two pipelines this winter, but both were already closed for political reasons.
Gas prices rose but only by about 10% on Tuesday afternoon.
In Germany, the Dax also took a late trading plunge, ending the day down 0.7%, while Paris’s Cac 40 fell late in the afternoon, down 0.3%.
The Wall Street indexes were also in the red, S&P 500 down 0.1% and the Dow Jones had lost 0.3% shortly after markets closed in Europe.
In company news, over-50s group Saga saw its shares plunge after telling shareholders that it was expecting lower profits for the full year than previously thought.
A challenging insurance market with high levels of claims inflation had impacted its profitability, Saga said, causing the business to lower its estimations by around £15 million.
Shares in Saga were down by nearly a quarter on Tuesday.
On the flip side, Upper Crust owner SSP Group raised its profit outlook for the full year after seeing a recovery of business and commuter travel, and a surge in summer holiday-goers.
Shares in the company, which operates food and beverage outlets in travel spots around the world, were up more than 3% after the positive trading update, and 1% higher when markets closed.
Meanwhile, Just Eat Takeaway.com told investors to expect to see higher profits in the second half of the year as a result of “significant progress” in its path to profitability. The group now expects to swing from a loss of 134 million euros (£120 million) in the first half of 2022 to a profit in the second.
Shares were up by more than 10% on Monday as investors reacted to the good news.
The biggest risers on the FTSE 100 were Glencore, up 14.95p to 471.4p, Hargreaves Lansdown, up 26.4p to 896p, Flutter Entertainment, up 240p to 10,260p, Antofagasta, up 24p to 1,074p, and Smurfit Kappa Group, up 54p to 2,657p.
The biggest fallers on the FTSE 100 were Rightmove, down 48.6p, SSE, down 122p to 1,549p, Taylor Wimpey, down 6.92p to 88.92p, Unite Group, down 62p to 818p, and Kingfisher, down 15.4p to 218.6p.