Asian markets tumbled Tuesday following painful losses in New York and Europe while the euro sat near nine-year lows as political uncertainty in Greece fanned renewed fears it could leave the eurozone.
Oil prices, which fell below the psychological $50 a barrel mark in US trade, edged up marginally but remained under pressure owing to a global supply glut, weak demand and a stronger dollar.
Tokyo tumbled 2.50 percent, Hong Kong lost 0.89 percent, Sydney eased 1.67 percent, Seoul was 1.30 percent lower while Shanghai reversed earlier losses to gain 0.70 percent.
The first full week of the new year got off to a traumatic start for dealers as they bet a January 25 general election in Greece will see a victory for the the left-wing Syriza party.
Markets fear the party will roll back austerity measures required under the IMF-EU bailout of the country, which could in turn lead it to exit the eurozone.
The year is "barely three trading days old and already the two biggest themes that were predicted to affect the markets this year are making headlines: oversupply of commodities and the eurozone," Evan Lucas, a markets strategist in Melbourne at IG Ltd., wrote in an email to clients, according to Bloomberg News.
At the weekend, Der Spiegel quoted German government sources as saying they consider Greece's exit "almost inevitable" if Syriza wins the snap poll.
Chancellor Angela Merkel and finance minister Wolfgang Schaeuble had come to consider Athens' removal from the bloc would be "manageable", the magazine said.
However, investors were spooked and on Monday Greek stocks sank more than 5 percent, while the Paris, Madrid and Milan exchanges fell more than 3 percent.
- Oil below $50 a barrel -
The Dow dived 1.86 percent, the Standard and Poor 500 fell 1.83 percent and the Nasdaq lost 1.57 percent.
In currency trade the euro sank to $1.1864 Monday, its lowest level since March 2006. On Tuesday morning the single currency recovered slightly buying $1.1943.
The euro was meanwhile at 142.58 yen against 142.74 yen in US trade and well down from the 144.58 yen Friday.
Adding to downward pressure is increased speculation that the European Central Bank will buy eurozone government bonds to counter deflation risks.
The dollar was at 119.40 yen early Tuesday, compared with 119.61 in New York Monday and also well down from 120.46 yen Friday.
Oil prices were marginally up Tuesday after slipping below $50 for the first time in more than five years in New York.
US benchmark West Texas Intermediate for February delivery rose eight cents to $50.12 while Brent crude for February gained 14 cents to $53.25. WTI tapped $49.95 Monday.
The cost of crude has plunged since June as supplies outstrip demand with key consumer China slowing down, the eurozone struggling and the dollar, in which it is priced, strengthening.
A decision late last year by the Organization of the Petroleum Exporting Countries (OPEC) to maintain output despite the glut has also cut into prices.
"The fundamentals of oil are unlikely to change in the first half of this year, which will see oil bedding down into its bear market for months to come," IG's Lucas said.
Gold was at $1,203.59.40 an ounce, compared with $1,196.40 on Monday.