Stock markets slumped Wednesday after President Donald Trump warned of "a very, very painful two weeks" to come for the United States, whose coronavirus death toll has overtaken that of China.
European equities fell hard, with London, Frankfurt and Paris all down around 4 percent. Tokyo earlier closed down 4.5 percent.
Wall Street opened sharply lower, but clawed back some of the losses as the morning wore on. The Dow was down 2.5 percent in midday trading.
Adding to the gloom, UK banks axed billions of pounds in shareholder dividends and stock buybacks after the Bank of England requested the move to boost liquidity as a way to stimulate the virus-hit economy.
Investor sentiment in Europe was also knocked by poor manufacturing survey data, jangling market nerves before Friday's key US non-farm payrolls figures.
The euro dropped against the dollar and pound.
"Trump's warning is the primary driver of today's downturn," Oanda analyst Craig Erlam told AFP.
"It's such a shift from his previous views on the impact of the coronavirus and finally an acceptance of how severe the situation is."
Asian bourses fell after a dire first quarter for markets, with traders contemplating the prospect of lengthy lockdowns as the coronavirus continues its deadly sweep across the planet.
"Donald Trump reflected the mood as he warned of weeks of pain still ahead -- a stark change from his rather casual approach thus far," noted Markets.com analyst Neil Wilson.
- 'How much permanent damage'? -
With the number of infected and dead still surging in Europe and the US, hopes are fading that strict containment measures keeping billions of people at home will be lifted soon.
That, in turn, is stoking uncertainty about the outlook for the global economy -- which is widely expected to slip into recession this year -- while there are also concerns about how long a recovery will take.
Trump has extended social distancing and stay-at-home orders until the end of the month, while members of his virus task force warned almost a quarter of a million Americans could die from the disease.
"The demand shock for oil and for the global economy more broadly will be more significant if mobility and social interaction restrictions stay in place beyond April," said AxiCorp's Stephen Innes.
"The real question for investors isn't how shockingly bad the first quarter is going to be -- it's how long the weakness will persist and, as a consequence, how much permanent damage will be done."
Oil slid Wednesday, as Saudi Arabia began ramping up output amid its price war with Russia.
However, there was some support after Trump said he was ready to hold talks with the Saudis and Russians.
US energy firms have been hit hard by the plunge in crude prices.
But "even if Mr Trump brings the Saudi-Russian oil price war to an end, which would be a difficult task, the tumbling demand is likely to drag the energy lower," said market analyst David Madden at CMC Markets UK.
World oil prices are close to 18-year lows at around $20-25 per barrel, having plunged by around 65 percent in the first quarter as lockdowns dampened demand.
US data showed stockpiles of crude oil and petrol surging higher as people in many states worked from home and stopped non-essential travel.
- Key figures around 1530 GMT -
London - FTSE 100: DOWN 3.8 percent at 5,454.57 points (close)
Frankfurt - DAX 30: DOWN 3.9 percent at 9,544.75 (close)
Paris - CAC 40: DOWN 4.3 percent at 4,207.24 (close)
Milan - FTSE MIB: DOWN 3.0 percent at 16,544.97 (close)
Madrid - IBEX 35: DOWN 3.0 percent at 6,579.40 (close)
EURO STOXX 50: DOWN 4.3 percent at 2,667.64
New York - Dow: DOWN 2.5 percent at 21,364.51
Tokyo - Nikkei 225: DOWN 4.5 percent at 18,065.41 (close)
Hong Kong - Hang Seng: DOWN 2.2 percent at 23,085.79 (close)
Shanghai - Composite: DOWN 0.6 percent at 2,734.52 (close)
Brent North Sea crude: DOWN 6.1 percent at $24.75 per barrel
West Texas Intermediate: DOWN 0.4 percent at $20.40 per barrel
Euro/dollar: DOWN at $1.0941 from $1.1031 at 2100 GMT
Dollar/yen: DOWN at 107.18 yen from 107.54
Pound/dollar: DOWN at $1.2399 from $1.2420
Euro/pound: DOWN at 88.23 pence from 88.82 pence