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NEW YORK (CNNMoney)
The Dow fell more than 150 points, or nearly 1%. The S&P 500 and Nasdaq were also down almost 1%.
Investors were cautious following news that Russia has moved forward with military intervention in Ukraine. Ukraine's new leaders have accused Russia of declaring war.
Stocks in Russia took the biggest hit. The Micex index tanked almost 11%, while the Market Vectors Russia ETF (RSX) was down 7%. Investors seemed to be very concerned by threats of serious sanctions against Russia from the United States and Europe.
Russia's central bank reacted by hiking interest rates, saying it wanted to maintain financial stability and inflation levels as market volatility increases.
All the major European stock markets fell sharply in afternoon trading, with Germany's Dax dropping more than 3%. France's CAC 40 was off more than 2% and London's FTSE 100 down about 1.5%.
The Ukraine fears hit most Asian stock markets as well. Hong Kong's Hang Seng index closed 1.5% lower and Tokyo's Nikkei dropped 1.3%. Stocks in Shanghai and Shenzhen bucked the trend and moved higher.
Related: 5 reasons Ukraine matters to the world economy
Though global markets were getting knocked down, Nigel Green, founder and CEO of deVere Group, said he doesn't expect the sell-off to last long.
"There has been some volatility in the capital markets as a result of the political and military uncertainty in Ukraine, which have naturally exacerbated concerns about the country's fundamental economic weaknesses," he said. "However, I fully expect this to be a short-term phenomenon. "
Green said that while Ukraine's problems may raise more concerns about emerging markets, he doesn't expect the crisis will trigger another global recession. Rather, Green said the situation will be limited to Russia and Ukraine.
Meanwhile, as investors seek safe-haven assets, gold prices rose by 2% to around $1,350 per ounce.
Investors were buying U.S. Treasuries too, pushing the 10-year yield down to 2.61% from 2.65 late Friday. Bond prices and yields move in opposite directions.
The price of oil is also up, with crude prices rising by 1.5% to nearly $104 per barrel.
"Russia's involvement clearly magnifies the scope for contagion and increases the possibility that global energy prices will be affected both directly and indirectly," wrote Stephanie Flanders, chief European market strategist for JPMorgan asset management in London.
Related: Fear & Greed Index still in Greed despite Ukraine worries
In company news, Men's Wearhouse (MW) said Monday that it has entered into merger talks with its rival retailer Jos. A. Bank (JOSB).
First Published: March 3, 2014: 9:44 AM ET
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