The FTSE 100 fell 3.3%, tracking declines across the world, as sharp rises in new cases in Iran, Italy and South Korea raised concerns about a bigger hit to the world economy than previously feared.
The midcap bourse suffered a 3% drop, tumbling to levels last seen in December.
Losses in Britain were broad based, with miners <.FTNMX1770> shedding nearly 6% on their worst day in nearly four years. EasyJet and British Airways-owner IAG led the wider travel and leisure sector <.FTNMX5750> down 5.3%.
"The coronavirus outbreak has altered market dynamics since late January," BlackRock analysts wrote in their weekly note.
"The spread of the virus ? and the containment measures imposed by the Chinese authorities ? have triggered global supply chain disruptions and a hit to global growth, making such global firms vulnerable."
Italian stocks plunged roughly 5.5%, after the country reported its fourth death from the virus and a jump in infections. Outside mainland China, the outbreak has spread to about 29 countries and territories, according to a Reuters tally. In England, four passengers evacuated from a cruise ship have tested positive for the virus.
Travel, tourism and luxury stocks have been among the worst hit as efforts to contain the deadly virus have led to travel restrictions to China.
Monday's dramatic fall left the FTSE 100 5.1% lower for the year.
Other news-driven moves dragged AB Foods down by 1.5%, after a warning that there was a risk of supply shortages on some lines if delays in factory production in China were prolonged due to the coronavirus outbreak.
In the more domestically focused midcap index, some of the biggest decliners were Wizz Air, Tullow Oil and Kaz Minerals.
In a bright spot, business supplies distributor Bunzl added 3% after posting a higher annual profit, thanks to acquisitions made last year.
Another gainer was precious metals miner Fresnillo, which gained 3.2% after it brought forward the production targets for the Mexican project, Juanicipio.
By Sagarika Jaisinghani and Muvija M