Just as Stockholm's markets opened, the Shanghai Stock Exchange closed 8.5 percent lower than at the close of trade on Friday, its largest decline since February 2007, before the last global financial crisis.
Both the Tokyo Stock Exchange and the market in Taiwan dropped by nearly five percent and Australia's share market had its worst trading day in six years.
There were also dips at the start of trading in major European cities including London, where the FTSE plunged 2.8 percent. Germany's DAX stock market index lost 3.24 percent of its value to fall below 10,000 points for the first time since January.
The financial unrest in Asia and Europe comes days after Wall Street suffered its biggest one-day loss in almost four years.
On Monday North Sea and US oil prices – a major marker of economic stability – dropped by just over a barrel to around 44 and 39 dollars respectively. The dollar also weakened against both the euro and the Japanese yen.
Global markets have been jittery since a shock currency devaluation in China almost a fortnight ago.
Johan Javaeus, chief strategist at one of Sweden's largest banks, SEB, told the TT news agency that the slump in China could be a warning sign for future problems in Europe and elsewhere.
“If you weigh up all this, then you also have a potentially much more negative scenario for the rest of the world – things could move off in the wrong direction. One could see it as a warning flag for something worse,” he said.
Nordea bank's equity strategist Mattias Eriksson added: “The big threat is that there will be a global recession as a result of lower economic growth in China…it is an important trading partner for most countries.”
Analysts in Asia described the mood among market players as one of “panic”.
“Markets are panicking. Things are starting look like the Asian financial crisis in the late 1990s. Speculators are selling assets that seem the most vulnerable,” Takako Masai, head of research at Shinsei Bank in Tokyo told the Reuters newswire.
But leading economists in Sweden warned those with cash invested in stocks and shares not to become unduly concerned.
“We have an extremely good period behind us,” said Maria Landeborn, savings expert for Skandia bank, referring to the past four years of stability in the global markets.
She told TT that while Swedes could see their investments decline in the immediate future, those hoping for a return in the longer term should not need to take any immediate action.
However she added that those with investments tied up in stocks and shares who were hoping to use the money within the next couple of years, for example to buy a new home or a car, should always consider keeping some of their cash in a more secure savings account.
“It's important that you have thought about the risks, and not been greedy and put everything into shares,” she said.