The global stock market sell-off has continued with US shares the latest to suffer amid mounting fears about inflation and interest rates.
Traders are nervously watching market movements
The Dow Jones index sank more than 80 points, wiping out its gains for the year after worrying inflation figures.
Meanwhile, Japanese stocks saw their biggest one-day fall in two years and European stocks hit six-and-a-half month lows.
Commodity prices also fell with gold witnessing biggest drop in 25 years.
Gold prices dropped below the $600 mark, falling as low as $565.50 during the day, while copper prices stood 35% off peaks of $4.04 hit just last month.
Elsewhere, crude prices slid $1.80 in the US to close at three week lows of $68.56 a barrel.
Earlier, the FTSE 100, France's Cac and the German Dax index all closed about 2% lower, hours after Japan's Nikkei index closed down 4.1%.
The sell-off did little to calm jittery US investors, who led Wall Street on a roller coaster ride ahead of official data showing inflation had risen more than expected.
According to a US government report core wholesale prices, excluding food and energy, rose by 0.3% in May, more than the forecast 0.2% rise.
The data solidified belief that the Federal Reserve would raise the benchmark US interest rate to 5.25% after its 28-29 June meeting, the 17th rise in a row.
Traders added that some US investors had kept to the sidelines ahead of further consumer price inflation figures due out on Wednesday.
"The (reports) are continuing the theme of the last couple of weeks of an increase in inflation and a slowdown in economic growth, neither of which is good for equities," said Nollenburger Capital Partners director of stock trading Todd Clark.
UK figures released on Tuesday showed inflation hitting 2.2% in May, a seven-month high.
Although the rise was expected, the rate is now above the British government's target rate of 2%.
Bank of England governor Mervyn King had earlier added to investors' uncertainty with a speech given on Monday.
He told business leaders in Scotland that recent fluctuations in stock markets reflected an economic outlook which was "far from certain" and that a "bumpier stretch of road" lay ahead.
The Nikkei lost 614.4 points - its largest single-day fall this year - to end at 14,218.6, a seven-month low. Big falls were also seen in Hong Kong, South Korea, Singapore, Taiwan and Australia.
South Asian markets followed suit in early trading. Bombay's Sensex fell 4.2% to a low for the year of 9,080 points.
Analysts said that markets were likely to remain volatile until there was more clarity about the state of global growth and the direction of interest rates in the US.