By Sudip Kar-Gupta

LONDON (Reuters) – FTSE fell on Monday to a near three-week low, as mounting geopolitical tensions over Ukraine troubled investors and weighed on heavyweight oil company BP.

The blue-chip FTSE 100 index was down by 0.8 percent, or 53.31 points, at 6,508.39 points in mid-session trading.

A 1.4 percent fall at BP acted as one of the biggest drags on the market, with BP taking around 5 points off the FTSE 100 because of the company’s exposure to Russia through its stake in Russian oil producer Rosneft.

Towns in eastern Ukraine braced for military action from government forces on Monday after a deadline passed for pro-Russian separatists to disarm and end their occupation of state buildings or face a major “anti-terrorist” operation.

“The situation does appear to be going from bad to worse in Ukraine. There is more of a risk-off sentiment building up, and I could see the FTSE drift lower to 6,430 or 6,400 points by the end of this week,” said Dafydd Davies, senior trader at London-based Prime Wealth Group.

The FTSE rose 14.4 percent in 2013 and reached a peak of 6,867.42 points in late January this year which marked its highest level since early 2000.

However, concerns about Ukraine and other emerging markets have since knocked the market off those levels and the FTSE is now down around 3 percent since the start of 2014.

Investors are also deterred by high valuations for the stock market relative to corporate profits. The FTSE 100 is trading on a 12-month forward price/earnings ratio of 13.2 times, against its five-year average which stands at around 11 times, Thomson Reuters Datastream shows.

“The valuations are pricing in an improvement that we haven’t seen yet,” said Peel Hunt equity strategist Ian Williams.

(Reporting by Sudip Kar-Gupta; Editing by Ruth Pitchford)