World stocks and oil prices fell Tuesday after Moderna warned that current vaccines might be less effective at fending off the Omicron variant, and eurozone inflation spiked to a record high.
In Frankfurt, London and Paris, sentiment was dogged by fears of a new economic fallout from the Covid crisis, as Frankfurt, London and Paris closed sharply lower.
Oil fell back in New York with WTI down 5.1 percent a barrel at $66.38 a three month low, while Brent crude was off 3.80 percent at $70.65.
The Moderna comments have reignited fears over how the Omicron variant spread could affect energy demand.
Analysts were concerned after Federal Reserve Chair Jerome Powell said the threat of persistently high inflation had risen, meaning that the US central bank would consider removing the stimulus sooner.
As a head of research at StoneX, Matt Weller, global head of research at StoneX, said that Chairman Powell has grown dramatically more concerned with the risk of sustained inflation and is therefore looking to end the central bank's asset purchases sooner than originally outlined.
Weller noted that Powell's comments have already sent a tempest through major markets, with the US central bank's preferred price gauge seeing a surge of five percent for the 12 months ending in October, well above its two percent goal.
The Dow had drifted down 1.9 percent two hours into the session, with the tech-heavy Nasdaq losing 2.0 percent.
The European markets selloff had earlier accelerated as data showed eurozone inflation rocketed to a record 4.9 percent of runaway energy prices.
It only took one comment from the boss of Moderna to derail markets once again, said AJ Bell investment director Russ Mould.
Markets hate uncertainty, and this is exactly what we have now. No one knows how much trouble the new variant is going to cause. Moderna Chief Executive Stephane Bancel's comments sent traders running for cover, according to an interview with the Financial Times.
Bancel said there is no world where the effectiveness is the same level as we had with Delta.
He said that the present jabs would have to be tweaked because of the high number of mutations on Omicron and its swift spread in South Africa.
The inflation drumbeat continues to sound, providing another reason for investors to worry, said Chris Beauchamp, IG analyst. In Britain, traders are assessing their hopes of a pre-Christmas interest rate hike.
Prior to Omicron, the Bank of England had been forecast to lift rates to dampen near decade-high British inflation.
New York- Dow was DOWN 1.7 percent at 34,476. 28 points are needed to make 28 points.
The euro dollar was DOWN at $1.1285 from $1.1291 at 2200 GMT on Monday.