World markets slumped with the FTSE 100 Index seeing more than £30 billion wiped off its value in its biggest one-day fall since the height of the Greek debt crisis.
London's top-flight fell 122.8 points to 6403.4, its lowest level since January, after fears over China were compounded by jitters over when the US might hike interest rates as well as more pressure on the oil price.
A vote in Germany's parliament to back an 86 billion euro (£61 billion) third bail-out for Greece failed to boost sentiment as focus turned to China.
Shanghai's main stock index had seen more big falls overnight, adding to jitters over the country, which have also been stirred after last week's devaluation of the yuan.
Prospects for the world's second biggest economy weigh heavily on UK-listed commodities giants such as Glencore - whose shares fell 10% after it posted a 56% plunge in half-year net income.
Mining giants such as Anglo American and Rio Tinto, which represent a large and heavily-weighted chunk of the FTSE 100, also fell.
The one-day drop of 1.88% for London's leading share index was the biggest since June 29 when Greek banks closed their doors at the height of the stand-off between the indebted country and its creditors.
But as fears over that crisis have ebbed, others have been raised. Among them are nerves about the potential impact of an interest rate hike by the US Federal Reserve.
Figures showing slowing inflation in the world's biggest economy were not enough to quell growing expectations that the Fed will act next month.
On Wall Street, the Dow Jones Industrial Average was down by more than 200 points and the gloomy sentiment washed over the Atlantic to add to the already-downcast mood in London. German and French markets were also down sharply.
Meanwhile the price of a barrel of Brent crude oil slipped to around 47 US dollars, close to a January low of 45 US dollars.
The price, already down by more than half since last summer, was under renewed pressure after US figures showing a bigger than expected build-up of supplies. The fall weighed on FTSE 100 heavyweights BP and Royal Dutch Shell.
Laith Khalaf, senior analyst at Hargreaves Lansdown stockbrokers, said: "Markets are looking east and don't like what they are seeing.
"Slowing economic growth, currency devaluation, and stock market mayhem in China have hit commodities and mining stocks, and with them the UK stock market.
"The fact UK stocks fell so steeply today despite Germany signing off on the Greek bailout underlines how peripheral this issue has now become, and how quickly the market can switch its focus.
"The millions of people who are exposed to the whole index through their pensions and investments have been dealt a pretty heavy blow by the turmoil in China, and the collapse in commodity prices."