Asian equity and oil traders ran off Tuesday, after the head of Moderna warned that current coronaviruses might be less effective at fending off the Omicron variant, fuelling fears that countries could be forced back into economically painful lockdowns.
After a two-day sell-off on Friday of the new variant, stocks had been edging up, as billions of people had been inoculated, according to some observers.
In an interview with the Financial Times, Stephane Bancel said that the present jabs would need to be tweaked because of the high amount of mutations on Omicron and its swift spread in South Africa.
There is no world, I think, where the effectiveness is the same level as we had with Delta, he told the newspaper.
Tokyo's Nikkei, which had been in positive territory for much of the day, ended up more than one percent down and Hong Kong extended losses. Singapore fell more than one percent and Seoul fell more than two percent. Jakarta was down and the futures in New York were sharply lower.
Before the interview was published, Sydney, Wellington and Taipei closed higher.
After Friday's collapse of more than 10 percent, the selling also spread to oil markets, where both main contracts plunged more than three percent, as demand fears came flooding back.
Tourism-linked firms were among the worst hit, with Cathay Pacific losing more than four percent in Hong Kong - having already been impacted by new restrictions on travel to the city and Singapore Airlines off more than one percent.
Kelvin Wong, a doctor at CMC Markets, said that the information on the Omicron variant is sketchy, how drastic its symptoms will be and how easily it can spread is also unknown, as is the effectiveness of current vaccines.
I expect to see more downside risk over the next couple of weeks unless there is more clarity on the Omicron strain. Bancel said he was already working on a jab specific to the new strain, and major firms said they were already working on it.
Pfizer chief Albert Bourla said testing could show existing shots protect less, which would mean that we need to create a new vaccine but he did not believe that the vaccines don't protect. There remains a lot of uncertainty and experts say it will take weeks before the full effects of the variant are known. The World Health Organization warned that it poses a very high risk to the world.
The investors have suffered a rough few months due to the impact of surging inflation and the possibility of central banks withdrawing the ultra-loose monetary policies put in place at the beginning of the epidemic.
US Federal Reserve boss Jerome Powell warned of the latest downside risks to employment and economic activity and increased uncertainty for inflation in prepared comments ahead of an appearance in front of the Senate Banking Committee later Tuesday. He also said that the virus could cause supply-chain disruptions that have been a major cause of the inflation spike this year.
Oil traders kept tabs on OPEC and other key producers, who are due to decide whether to lift output each month in light of the new travel restrictions and the threat of Omicron.
The group had been contemplating a pause after the United States and several other countries, including China and Japan, released some crude from their reserves to temper a price surge.
Carsten Fritsch, of Commerzbank, said there was a lot to suggest that OPEC will not initially step up its oil production in an effort to maintain current prices at around $70 a barrel.
If OPEC does not take effect, howie Lee of Oversea-Chinese Banking Corp said it will give another reason for oil to find a firmer footing in West Texas Intermediate: DOWN 3.5 percent at $67.51 per barrel.
Brent North Sea crude oil was DOWN 3.6 percent at $70.80 per barrel.
New York - Dow was up 0.7 percent at 35,135.