“Freedom day” in England fell flat for London’s markets as rising virus concerns dragged the FTSE 100 to its lowest level since April.
A jump in case rates and soaring numbers of workers self-isolating have dampened any optimism about the further easing of restrictions.
Travel and Leisure firms were once again poor performers as they were also impacted by the latest changes to the international travel lists.
The FTSE 100 closed 163.7 points, or 2.34%, lower at 6,844.30 on Monday.
Michael Hewson, chief market analyst at CMC Markets UK, said: “Monday was supposed to be a landmark day where the UK economy finally shook off the handbrake of Covid-19 restrictions.
“Instead of a story of vaccine success it has turned out to be, not only a political shambles, but a big market sell-off over concern about the effect rising hospitalisations, along with big increases in the numbers of people self-isolating will have on the recovery story.
“These rising virus concerns have rippled out across global markets with European markets sliding sharply, the Dax hitting a two-month low, and the FTSE 100 closing at its lowest level in three months, with nearly all sectors in negative territory.”
The German Dax decreased by 2.62% and the French Cac moved 2.54% lower.
In the US, the markets took their cue from the declines across Europe to open sharply lower.
Meanwhile, sterling nudged higher as traders sought comfort in more traditionally resilient currency markets.
The pound was up 0.17% versus the US dollar at 1.369 and was 0.17% higher against the euro at 1.160.
In company news, Spire Healthcare plunged in value after it did not secure sufficient shareholders support for a £1 billion takeover bid from rival Ramsay Health Care.
Spire’s board had recommended investors vote in favour of the deal but just 69.9% of shareholders supported it, causing the deal to collapse.
As a result, shares in the firm tumbled by 17p to 218p at the close of play.
Ocado slid in value, dropping to its lowest in more than a year, after it was forced to axe thousands of orders following a fire caused by robots at one of its warehouses.
The company reported a fire at its fulfilment centre in Erith, in south-east London, after a crash involving three robots on Friday.
Shares in the online retail and technology firm finished 34p lower at 1,771p.
Marks & Spencer, which runs an online retail joint venture with Ocado, also dropped, falling by 6p to 132.3p, as traders feared a knock-on effect from the fire.
Sheffield video game market Sumo Group soared after Tencent the Chinese gaming giant which owns Fortnite, agreed to snap it up for £919 million.
Shares in the company leapt by 145p to 503p.
The price of oil also slumped, falling to a month-low, after Opec+ members agreed to increase output by up to 400,000 barrels a day.
Brent crude plunged by 6.02% to 69.16 dollars per barrel.
The only four risers on the FTSE 100 were Just Eat Takeaway, up 190p at 6,034p, Pearson, up 10.6p at 822.6p, B&M, up 2.8p at 557.8p, and Hikma, up 5p at 2,635p.
The biggest fallers of the day were ITV, down 8.05p at 113.25p, Rolls-Royce, down 6.06p at 87p, IAG, down 8.78p at 159p, and St James’s Place, down 76.5p at 1,465.5p.