More than £19 billion was wiped off the FTSE 100 Index on Monday as concerns over Hillary Clinton's health and a potential interest rate hike by the US Federal Reserve spooked investors.
London's premier index fell sharply to levels not seen since August 3, down 1.12%.
At one stage, all 100 companies listed on the FTSE 100 were trading in negative territory.
"With little on the economic agenda, a severe bout of panic has struck the global markets, causing the kind of declines not seen since the Brexit," Connor Campbell, a financial analyst at SpreadEx, said.
Meanwhile, a lower dollar drove sterling prices higher. The pound was up by around 0.35% at 1.332 against the US dollar, and higher by 0.29% at 1.186 against the euro.
Stocks across the globe slumped after Democratic presidential nominee Hillary Clinton was diagnosed with pneumonia just weeks ahead of the US election.
The alarm was raised after Mrs Clinton unexpectedly left a 9/11 ceremony in New York on Sunday, and was seen stumbling into her vehicle.
Jane Foley, a senior FX strategist at Rabobank, explained that the news was likely to worry investors "given the uncertainties about trade and foreign policy that a victory from Republican nominee (Donald) Trump would unleash".
Meanwhile, concerns have grown over the likelihood of an interest rate hike by the US Federal Reserve when committee members meet on September 21.
It follows comments by Boston Federal Reserve president Eric Rosengren, who said the US economy would be at risk if the central bank waited too long to raise rates.
Across Europe, the German Dax closed 1.34% lower, while the French Cac 40 dropped 1.15%.
In oil markets, a falling dollar helped to support Brent crude oil prices, which rose 0.2% to 48.11 US dollars
UK stocks were dragged down by Associated British Foods (ABF), which said that like-for-like sales at Primark are expected to fall by 2% over the year as warm pre-Christmas weather and a "very cold" March and April dampened its performance.
ABF added that post-Brexit currency movements would have both positive and negative effects on the group.
ABF shares closed lower by 10.8%.
Banking shares including Lloyds, RBS and Standard Chartered were among the worst performers on the FTSE 100. Investec downgraded its outlook for RBS, saying the lender's recovery was "distant and uncertain".
Pharmaceutical companies AstraZeneca, Shire and Reckitt Benckiser made gains after Jefferies upgraded its view on AstraZeneca, which is developing a new drug meant to treat lung cancer.