UK banks Barclays and RBS were among the FTSE 100’s biggest losers on Monday, both dropping about 1%.
But the biggest faller was troubled doorstep lender Provident Financial, which shed 5.8%.
At the other end of the scale, the biggest climbers were IT business Micro Focus International, up 3.2%, and mining firms including Anglo American.
Overall, the 100-share index edged 5 points or 0.07% lower to 7,318.88 after a choppy day of trading.
Analysts said investors were unnerved by geopolitical tensions resurfacing between the US and North Korea.
“The two nations are locked in a stalemate, and this week we will see the US and South Korea engage in their 10-day military exercises,” said David Madden at CMC Markets.
Henry Croft at Accendo Markets said financial stocks were among those being sold off due to the investor unease.
“Alongside that you have a mixed overview for British banks, what’s going to happen in the future – it’s looking less and less likely that we’re going to see a Bank of England rate hike,” he added.
Provident Financial suffered after a Sunday Times article suggested hedge funds were betting against the stock.
Miners fared better thanks to a rise in metal prices. Zinc hit its highest price in a decade as investors backed metals used by China’s steel sector.
On the currency markets, the pound was up 0.19% against the dollar at $1.2900 but 0.27% lower against the euro at 1.0919 euros.