* FTSE 100 falls 2.6 percent, lowest closing since Apr 29
* Anglo American gains after proposed merger with Xstrata
* Oil majors fall after crude prices fall to $67
By Harpreet Bhal
LONDON, June 22 (Reuters) - Britain's FTSE 100 share index ended 2.6 percent lower on Monday, as falling commodity prices pressured miners and oil majors, although Anglo American was boosted by news of Xstrata's proposed merger talks.
The FTSE 100 closed down 111.88 points at 4,234.05, its lowest closing level since April 29. The index has fallen 4.2 percent so far in June, reversing three months of consecutive monthly gains since the all-time low reached in March.
Bucking the trend, Anglo American was the biggest blue chip gainer, rising 4.6 percent, after rival Xstrata said it wanted talks about a proposed merger of equals, worth about $68 billion.
Xstrata shed 6.7 percent and Lonmin fell 8.1 percent on speculation that Xstrata could sell its 24.9 percent stake in the platimum producer as a result of the proposed merger.
Oil and gas firms took the most points off the index, after oil prices fell towards $67 a barrel on the back of a strengthening U.S. dollar.
Royal Dutch Shell, BP and BG Group lost between 3.5 and 6.1 percent.
"A negative move from oil is proving negative for equities as well and they are very highly correlated at this moment in time," said Angus Campbell, head of sales at Capital Spreads.
He also said that political uncertainty in Iran has rattled investors nerves and could be contributing to negative sentiment in the market.
Iran's hardline Revolutionary Guards on Monday threatened to crack down on street protests after opposition leader Mirhossein Mousavi called on supporters to stage more demonstrations over the disputed June 12 election.
Softer commodity prices pressured other miners, with BHP Billiton, Eurasian, Rio Tinto and Kazakhmys shedding between 4 and 7.5 percent.
Fresnillo fell 7.5 percent. The world's largest primary silver producer dropped a hostile takeover offer for MAG Silver .
Banks were broadly weaker. Barclays, HSBC, Standard Chartered, Royal Bank of Scotland and Lloyds Banking Group fell between 1.8 and 4 percent.
PROPERTIES PRESSURED
Asking prices for homes in most of Britain fell in June after four months of rises, property website Rightmove said on Monday.
Average asking prices for properties new to the market fell 0.4 percent this month, after rising 2.4 percent in May, Rightmove said. The annual rate of decline eased to 5.5 percent, its lowest since last October, from 6.2 percent in May.
Among other FTSE 100 fallers, British Airways shed 8.6 percent after the Daily Telegraph said that the airline has clashed with its pension fund trustees over a higher-risk investment strategy.
Medical equipment manufacturer Smiths Group was one of the few stocks in positive territory, rising 3.5 pecent, after Deutsche Bank upgraded its rating for the firm to "buy" from "hold" and increased its target price.
The U.S. Federal Reserve's two-day Open Market Committee rate-setting meeting begins on Tuesday, with investors expected to be focused on any comments emerging on the progress of quantitative easing and signs of economic recovery.
The FTSE 100 index had a slightly different make-up on Monday as the latest quarterly reshuffle took effect, with London Stock Exchange, 3i Group and Wolseley making a return to blue-chip status after one quarter in the mid caps.
LSE was down 4.1 percent, 3i shed 4.3 percent and Wolseley lost 3.7 percent. (Additional reporting by Simon Falush; Editing by Greg Mahlich)