China's move to retaliate against the latest US tariffs pummeled global stocks on Monday, with Wall Street suffering an especially bruising blow amid fears the year-long conflict could deteriorate further.
The Nasdaq experienced its worst day of 2019 after Beijing announced it would increase tariffs on $60 billion worth of US goods from June 1, striking back after US-China trade talks ended last week with no agreement and after Washington raised tariffs and signaled it could impose additional levies on Chinese goods soon.
The editor of the party-owned Chinese newspaper Global Times said on Twitter Beijing could take additional actions, including dumping US Treasuries, ending US agricultural purchases and reducing orders for Boeing airplanes.
"A US-China trade deal was pretty much priced into the market," said Sam Stovall, chief investment strategist at CFRA Research. "Now who knows what has to be accomplished before a deal can be reached?
"That is causing investors to bail out and say 'I don't know what is going to happen.'"
US stocks opened sharply lower and fell further later in the session. The Dow lost more than 615 points, or 2.4 percent, to finish at 25,324.99, its lowest close in more than three months.
Paris and Frankfurt both lost more than one percent, while London suffered more modest declines.
Earlier, Asian markets had begun the day in underwhelming fashion in Asia, as the lack of a US-China trade deal after last week's talks in Washington jarred markets.
Both sides have indicated that discussions will continue, although no date has been set for the next round of talks, which will be held in Beijing.
Despite Monday's drop, markets still believe a deal is likely, said Pantheon Macroeconomics' Ian Shepherdson.
"If markets were to believe wholeheartedly that the trade talks with China will break down and that the US will impose tariffs on all Chinese imports, as the president has repeatedly threatened, the index would be much lower," he wrote in a note.
The flare-up in trade conflict also weighed on the oil market, which had initially been propelled Monday by mounting tensions in the oil-rich Middle East.
Saudi Arabia said that two of its oil tankers were damaged in mysterious "sabotage attacks."
Riyadh, Tehran's regional arch-rival, condemned "the acts of sabotage which targeted commercial and civilian vessels near the territorial waters of the United Arab Emirates," a foreign ministry source said.
Tehran called for an investigation into Sunday's "alarming" attacks off the Emirati coast and warned of "adventurism" by foreign players to disrupt maritime security.
But crude finished Monday's session lower on worries that the trade war could slow global growth, denting oil demand.
- Key figures around 2050 GMT -
New York - Dow: DOWN 2.4 percent at 25,324.99 (close)
New York - S&P 500: DOWN 2.4 percent at 2,811.87 (close)
New York - Nasdaq: DOWN 3.4 percent at 7,647.02 (close)
London - FTSE 100: DOWN 0.6 percent at 7,163.68 (close)
Frankfurt - DAX 30: DOWN 1.5 percent at 11,876.65 (close)
Paris - CAC 40: DOWN 1.2 percent at 5,262.57 (close)
EURO STOXX 50: DOWN 1.2 percent at 3,320.78 (close)
Tokyo - Nikkei 225: DOWN 0.7 percent at 21,191.28 (close)
Shanghai - Composite: DOWN 1.2 percent at 2,903.71 (close)
Hong Kong - Hang Seng: closed for a public holiday
Oil - Brent Crude: DOWN 39 cents at $70.23 per barrel
Oil - West Texas Intermediate: DOWN 62 cents at $61.04 per barrel
Euro/dollar: DOWN at $1.1227 at $1.1233 at 2100 GMT
Pound/dollar: DOWN at $1.2959 from $1.2998
Dollar/yen: DOWN at 109.30 yen from 109.95 yen