* London stock market closed on Monday
* FTSE 100 down 0.1 pct, falls off 3-week highs
* Airlines hit by Iceland volcano disruption worries
* Investors cautious before Fed Chair Yellen’s speech
By Sudip Kar-Gupta
LONDON, Aug 22 (Reuters) - Britain’s top equity index slipped back from three-week highs on Friday, with shares in airline companies hit by worries about disruption caused by possible volcanic activity in Iceland.
Oil and gas services group Petrofac also underperformed, falling 1.4 percent after the company said its chairman had resigned.
The blue-chip FTSE 100 index was down by 0.1 percent, or 8.29 points, at 6,769.37 points. The London stock market is closed for a public holiday on Monday.
Airlines were among the worst performers, with easyJet falling 1.6 percent while International Consolidated Airlines Group - which owns British Airways and Iberia - retreating 0.9 percent due to the Iceland situation.
A 2010 volcanic eruption at Eyjafjallajokull, a little over 100 km (65 miles) from the capital of Iceland, disrupted the air travel of more than 10 million people.
“The airlines continue to slide as fears over seismic activity in Iceland give investors and travellers deja vu of the chaos caused in 2010,” said Will Hedden, premium client manager at IG.
Traders were also shying away from adding on large equity positions ahead of a speech by U.S. Federal Reserve Chair Janet Yellen that could hint at the timing of a U.S. rate hike.
Analysts said markets were broadly expecting Yellen to remain fairly dovish in Friday’s speech to the annual gathering of central bankers in Jackson Hole, Wyoming. Any shift away from that stance could darken market sentiment.
The FTSE 100 hit a peak of 6,894.88 points in mid-May, which marked its highest level since December 1999, but the market has since given up much of that ground due partly to worries over conflicts in Ukraine and Iraq.
Basil Petrides, sales trader at Beaufort Securities, said investors could be tempted to sell out and book profits if the FTSE could not break above previous highs in the 6,830-6,890 points range set in the last two months.
“If it does not take out those previous highs, then it could lead to a minor pullback,” he said. (Additional reporting by Atul Prakash; Editing by Mark Heinrich)