The UK's premier index briefly reached a 13-month high thanks to surging oil prices and a strong rally from blue-chip banking stocks.
The FTSE 100 Index touched 6,829.47 - its highest level since June 25 last year - before paring back gains to close up 15.66 points to 6,809.13.
Heavyweight financial stocks led the charge on the London market, with Barclays among the biggest risers after being handed an upgrade from neutral to outperform by Exane BNP.
Shares in Barclays stepped up 3.5% or 5.4p to 157.4p, with some investors feeling the post-Brexit rout on British banks was overdone.
Royal Bank of Scotland climbed 6.5p to 184.7p and Lloyds Banking Group lifted 1.4p to 54.6p.
Tony Cross, market analyst at Trustnet Direct, said: "It's also worth noting that Lloyds and RBS – the two banks who still have significant state holdings – have been cheered through the day with that news of no fire sale by the Government seemingly bolstering investor confidence."
The price of oil surged 2.4% to 45.31 US dollars a barrel amid growing speculating that Opec may attempt to ward off a global supply glut by curbing output.
European markets continued to make gains on the back of last week's better-than-expected employment data from the United States.
Employers across the Atlantic added a healthy 255,000 jobs in July, keeping the US unemployment rate at a low 4.9%.
The figures showed employers brushed aside concerns over Britain's vote to quit the European Union and remained untroubled by lacklustre growth from the US economy, which came in last week at a lower-than-expected rise of 1.2% in the three months to June
Germany's Dax was up 0.6% and the Cac 40 in France rose 0.1%.
On the currency markets, the pound slipped 0.2% to 1.304 US dollars, and was 0.1% lower against the euro, ahead of Tuesday's update on the UK's manufacturing sector.
The official figures for manufacturing and industrial production will give an insight into how the sector performed in the run-up to the referendum result in June, with many economists predicting the sector will record a marked slowdown in July.
The closely watched Markit/CIPS UK Manufacturing purchasing managers' index revealed earlier this month that it fell to levels last seen in February 2013, hitting 48.2 in July, down from 52.4 in June and below economists' expectations of 49.1.
In stocks, pollster YouGov said it is benefiting from the fall in the value of the pound, adding that its full-year results will come in ahead of expectations.
The firm said it achieved double-digit sales growth over the past 12 months, driven by increased turnover from the US and the Middle East.
The company added that it was boosted by higher revenue from its data products and services.
Shares were up nearly 4% or 7.4p to 197.9p.
The biggest risers on the FTSE 100 Index were Royal Bank of Scotland up 6.5p to 184.7p, Barclays up 5.4p to 157.4p, Antofagasta up 17p to 531p, and BHP BIlliton up 33.5p to 1047.5p.
The biggest fallers were Hikma Pharmaceuticals down 101p to 2294p, Shire down 115p to 5030p, Persimmon down 29p to 1694p, and Compass Group down 23p to 1444p.