The blue-chip index dropped 2.0% and posted its biggest monthly decline since March 2020. Still, its exposure to commodity-linked firms and global companies helped it outperform its global peers this year.

"The FTSE 100 has very little to do with the UK economy itself, so the local recession is less impactful," said Azad Zangana­, a senior European economist and strategist at Schroders.

"But if we were to see a global recession, we would eventually see a hit to demand for commodities, so that area could potentially suffer."

The domestically focused mid-cap FTSE 250 index declined 2.0%, shedding 11.7% in the June quarter, as investors price in lower UK economic growth and corporate profits because of soaring inflation, which the Bank of England expects to exceed 11% in October.

The FTSE 250 index is already in a bear market, down more than 23% after scaling a record closing high in September 2021.

Britain's economy grew by an expected 0.8% in the first quarter, but risks shrinking in the second quarter due to a hit to demand as inflation jumped to a 40-year high of 9.1%.

Miner Anglo American and retailer B&M European Value Retail fell more than 5% to lead losses on the FTSE 100.

Heavyweight oil companies BP Plc and Shell slipped 2.4% and 2.3%, respectively, while industrial metal and mining stocks also dropped.

HSBC Holdings, Lloyds and Natwest Group fell between 1.3% and 3.0% after Barclays cut its price targets for the stocks.

Bunzl Plc gained 1.8% after the business supplies distributor said it expected higher annual revenue, benefiting from red-hot inflation and acquisitions in the last year.

(Reporting by Devik Jain, Sruthi Shankar and Amal S in Bengaluru; Editing by Rashmi Aich, Subhranshu Sahu and Barbara Lewis)

By Devik Jain