The prospect of a Russian attack on Ukraine and expectations of further Fed tightening weighed on global equities and riskier assets on Monday, while the dollar strengthened as a safe haven.
Wall Street stocks opened sharply lower after last week's worst week since 2020.
The Dow Jones Industrial Average was down 1.32% in early trade, the S&P 500 was down 1.71% and the Nasdaq Composite was down 2.14%.
NATO said on Monday it was putting forces on standby along the Ukrainian border and bolstering eastern Europe with more ships and fighter jets in response to Russia's military buildup.
The move came as a series of signals that the West was preparing for an aggressive Russian move against Ukraine, despite Moscow denying any plans to invade.
The US State Department said on Sunday that it is urging diplomats' families to leave Ukraine as US President Joe Biden weighs options for increasing US military resources in the region to counter a surge in Russian troops.
The Euro STOXX 600 fell 2.1% to its lowest level since December 20 and was on course for its worst day since late November. The MSCI world stock index, which tracks stocks from 45 countries, lost 2.34%.
Analysts noted a reluctance on the part of investors, rarely seen in the post-2008 era of ultra-low interest rates and liquidity boosted by central banks, to reinvest in equities.
"Ukraine is high on the agenda right now," said Michael Hewson, senior market analyst at CMC Markets. Over the past 12 years, the general investor mentality has been buy-the-dip. This is the first time in the last 12 years that I feel like this isn't the standard position to be in.
As investors dumped their money from stocks, oil prices also fell after five weeks of climbing to a seven-year high on expectations of continued strong demand and limited supply. [O/R]
Brent crude was last down 1.4% to $86.66 a barrel. US Crude Oil fell 1.68% to $83.71 a barrel.
Other riskier assets suffered. Bitcoin plunged nearly 9% Monday to its lowest level in six months. The cryptocurrency has lost more than half of its value since hitting an all-time high of $69,000 in November.
FED NERVES
Nervousness about Wednesday's Federal Reserve meeting also contributed to the development. The Federal Reserve is expected to confirm that it will soon begin draining the massive pool of liquidity that has propelled growth stocks higher in recent years.
Anxious markets are now pricing in even a small chance of the Fed raising rates this week, although the overwhelming expectation is a first hike to 0.25% in March and three more to 1.0% by year-end.
10-year government bond yields, while recovering late last week, are still 22 basis points higher month-to-date at 1.77%, not far from levels last seen in early 2020.
That rise has generally supported the US dollar, which is up 0.5% against a basket of currencies over the past week, to end 0.45% higher at 96.075.
