At one point, just three shares in the main index were showing gains – Royal Mail, Ocado and Polymetal – a precious metal business favoured by gold speculators.
The biggest fallers included BA owner IAG, off 7p at 125p and jet engine maker Rolls Royce, down 6p at 108p.
The oil price fell $2.36 to $71.16 on the expectation of further travel restrictions. Brent crude is down towards 20% since October.
Yesterday health secretary Sajid Javid refused to rule out fresh directives in the face of soaring Omicron cases.
Sterling also fell, the pound losing 0.4% against the euro to 85.24p.
With football games and restaurant bookings cancelled, the hospitality industry in particular is worried about how it will survive the winter.
There are wider fears about economies around the world being dragged down due to the latest Covid related crisis.
Goldman Sachs cut its growth forecast for the US from 3% to 2% for the first quarter of next year in light of this.
Asian and European markets were all down. Hong Kong was off 2%, the Nikkei in Tokyo a bit more than that.
Russ Mould at AJ Bell said: “After battling endless headwinds in recent weeks, markets have finally been knocked over as the rapid spread of Omicron finally reaches panic mode. Tighter restrictions across parts of Europe and fears that we could see a circuit breaker in the UK have put a chill in the air for investors.”
Holland yesterday re-entered a national lockdown, with all but the most essential shops closed until mid-January.
Some in the City noted that with more people either working from home or already on Christmas holiday, trading volumes were light, which can increase market volatility.
They also note that markets are in a much stronger position than they were a year ago. The FTSE 100 is up about 11% in 2021.
A mooted “Santa rally” – a sometimes typical jump in share prices around Christmas time – looks off the cards this year, however.
Some signs of optimism arrived in the latest CBI industrial trends survey, which showed manufacturing output in December rising at the fastest pace since July.
Anna Leach, CBI Deputy Chief Economist, said:
“UK manufacturing demand remains strong, and output accelerated to meet this demand in December. However, behind the scenes, firms are battling pressures on a number of fronts.”