Russia's intervention in Ukraine drove up crude oil and prices for gold and United States government debt on Monday as the heightened tensions spurred investors to seek safe havens and sell any exposure to the region.
Crude prices rose more than US$2 (NZ$2.4) a barrel, gold futures jumped 2 per cent and prices of top-rated euro zone government bonds surged.
The aversion to risk took a steep toll on equities markets, with the Russian stock market .MCX slumping 11 percent. Stocks across Europe and on Wall Street also took a beating.
Market volatility indexes, a sign of investor apprehension, surged, with the Euro STOXX Volatility Index spiking 30.4 per cent in its biggest one-day gain since 2011. The US CBOE volatility index rose 15.9 per cent.
"Investors had underestimated the risks of an escalation in Ukraine, so the events over the weekend are a wake-up call for the market," said David Thebault, head of quantitative sales trading at Global Equities in Paris.
President Vladimir Putin's forces tightened their grip on the Crimea region of Ukraine, sparking the stock plunge in Moscow and forcing Russia's central bank to spend US$10 billion of reserves to prop up the ruble.
Ukraine said Russia was massing armoured vehicles on its side of a narrow stretch of water closest to Crimea after Putin declared over the weekend that he had the right to invade his neighbour to protect Russian interests and citizens.
The ruble traded off about 1.45 per cent after earlier touching record lows against the dollar and the euro. The central bank lifted its base lending rate by 1.5 percentage points to 7 per cent at an unscheduled meeting.
Russia's sovereign dollar bonds also fell, while the cost of buying five-year swaps to insure against a Russian debt default jumped 33 basis points.
Ukraine's hryvnia currency fell to a record low against the dollar, pushing the country's dollar bonds down 6 points. Safe-haven German Bund futures settled up 76 ticks at 145.14.
Banks took the most points off European stock indexes, with lenders exposed to Ukraine and Russia falling sharply. The Euro STOXX banks index fell 3.8 per cent in the biggest drop since last August. Austria's Raiffeisen slumped 9.6 per cent, while France's Societe Generale fell 5.4 per cent and Italy's UniCredit lost 6.2 per cent.
Other companies with significant exposure to Russia also fell, with carmaker Renault shedding 5.4 per cent and brewer Carlsberg losing 5.3 per cent.
The pan-European FTSEurofirst 300 index fell 2.2 per cent to close at a provisional 1318.84.
No major European stock market escaped the sell-off, with Germany's DAX particularly hard hit, falling 3.4 per cent in its biggest single-day drop since May 2012.
France's CAC-40 index fell 2.7 per cent, and the Italian stock market slid 3.3 per cent.
The declines followed overnight weakness in Asia, with MSCI's broadest index of Asia-Pacific shares outside Japan down 0.9 per cent and Japan's Nikkei 225 skidding 1.3 per cent.
The Dow Jones industrial average fell 216.07 points, or 1.32 per cent, to 16,105.64. The S&P 500 lost 21.11 points, or 1.14 per cent, to 1838.34 and the Nasdaq Composite dropped 55.663 points, or 1.29 per cent, to 4252.456.
For US investors, Russia's intervention in Ukraine comes just as economic data has been expected to improve and provide further upside for stocks on Wall Street, said David Joy, chief market strategist at Ameriprise Financial.
Data released on Monday showed renewed strength in US manufacturing. But tensions over Ukraine have changed the investment outlook at a time that valuations for US equities are not cheap, Joy said.
"Being expensive, it makes sense to me to take some risk off the table and wait to see how this plays out," Joy said.
The dollar and yen gained as investors sought the safety of those currencies after Russia's intervention in the Crimean peninsula.
The greenback was further supported by economic data showing an increase in US personal income and spending in January in the midst of one of the worst winters in recent memory.
"Investors turned to classic safe havens amid heightened tensions in Ukraine," said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington.
Crude oil prices jumped. Brent crude hit a peak of US$112.39 a barrel, the highest level since December 30, and was up US$2.27 at US$111.34. US crude jumped US$2.14 to US$104.73 a barrel.
Gold futures were last up 2.43 per cent at US$1,353.7 an ounce.