The price of Brent crude oil fell 2.7% to $60 per barrel on reports US companies added rigs for the first time this year, putting pressure on major FTSE 100 constituents Royal Dutch Shell and BP.
BP slipped 2.4% to 494.9p and Shell slid 1.8% to £22.27. At the close, the FTSE 100 traded 0.9% lower at 6,747.
On Wall Street, investors fretted over the potential impact of the US-China trade war on Apple, Facebook and Amazon which are due to report later this week, after earnings at Caterpillar missed forecasts.
Media reports that online groceries play Ocado has held secret talks with Marks & Spencer over the launch of a food delivery service, lifted shares in both companies.
Ocado was up 2.1% at 966p while Marks & Spencer was flat at 290.3p.
Retailer Dixons Carphone gained 1.5% to 144.3p as investment bank Morgan Stanley moved from equal weight to overweight, and a downbeat research note from Liberum pushed trading platform IG 5% lower to 612p.
LARGE AND MID CAP RISER AND FALLERS
Services company John Wood was down 2.2% at 522.4p, paring earlier losses, as it announced that it had sold three non-core assets for around $28m combined.
Fluid-system supplier for light vehicles TI Fluid Systems gained 5.4% to 169.7p after announcing its annual operating margins would hold broadly steady. The company also said its current CFO would stand down by the end of 2019.
Paragon Banking nudged 0.3% higher to 411.8p as it boosted lending volumes by 41% in its fiscal first quarter, putting it on track to meet its full-year guidance.
SMALL CAP RISERS AND FALLERS
Regional airline Flybe gained 20.9% to 4.1p, off a low base, as it confirmed media reports that major shareholder Hosking Partners had called for the departure of its chairman.
Hosking also wants a probe conducted into the regional carrier's acceptance of a takeover bid from a consortium comprising Virgin Atlantic and Stobart Group pitched at just $2.8m.
Stockbroker Shore Capital was unmoved at 215p on confirmation that it is talks to buy small cap specialist Stockdale Securities.
Petra Diamonds slumped 20.8% to 35.6p, as investors looked past a 10% rise in first-half production, to an accompanying rise in company debt levels.
Detection technology supplier Kromek was broadly unmoved at 28.1p on news it had won a new contract from an existing customer worth a minimum of $58.1m over a seven-year period.
Communications services group Maintel gained 9.9% to 465p as it guided for annual adjusted earnings at the top end of its previous expected range.
Payments technology company PCI-PAL rallied 46.3% to 25.6p on revealing a larger-than-expected contract haul in the first half.
Textile processor Leeds Group fell 7.4% to 29p as its annual sales slipped amid 'challenging' market conditions.