Sterling slumped to an eight-week low Tuesday on Brexit concerns, while most global equity markets pulled back ahead of a much-anticipated Federal Reserve policy decision.
Oil prices, meanwhile, fell further on renewed concerns that OPEC's production cuts will fail to erase a global crude glut.
"European and US markets are suffering in a whirlwind of anxiety, with the impending Article 50 activation, Dutch elections, Fed rate hike and the issue of a second Scottish (independence) referendum all feeding into market uncertainty," said market analyst Joshua Mahony at online trading firm IG (Frankfurt: A0EARV - news) .
Sterling slid to $1.2110 at one point, the lowest level for two months.
"The reality of the UK?s divorce from Europe and two years of horse-trading to agree trade deals is beginning to spook the forex market," said Kathleen Brooks, research director at City Index.
After weeks of wrangling, British lawmakers on Monday finally granted Prime Minister Theresa May the right to trigger Article 50 of the EU's Lisbon Treaty, which would start the two-year divorce process from the European Union.
May made a major statement to parliament on Tuesday but she kept up the suspense over when she would trigger Brexit, saying she would have the power to do so within days and it would happen by the end of March.
The fall of the pound often lends support to London's benchmark FTSE 100 stocks index that features numerous multi-nationals earning in currencies other than the pound, but the drop in crude prices dragged down energy companies.
West Texas Intermediate (WTI) finished down 68 cents at $47.72 a barrel, while Brent oil in London shed 43 cents to $50.92 a barrel.
While OPEC said in its monthly report on Tuesday that oil producers had kept their promises to cut output, the market was spooked about the cartel's commitment to its production limits as Saudi Arabia increased output last month.
Saudi Arabia took steps to address the worries, releasing a statement that attributed the higher figures in February to storage adjustments and saying the amount of oil supplied to the market had actually fallen.
Saudi Arabia "is committed and determined to stabilize the global oil market by working closely with all other participating OPEC and non-OPEC producers", the energy ministry said.
Elsewhere in Europe, there is unease about Wednesday's elections in the Netherlands, where far-right anti-EU nationalists are predicted to score well.
- Markets expect rate rise -
Investors in the US fixated on the two-day Federal Reserve policy meeting that concludes Wednesday as new data showed higher US wholesale inflation in February, raising anxiety Fed chief Janet Yellen could hint at more rate hikes this year. The Fed already was anticipating three increases this year.
"It's a foregone conclusion the Fed will raise rates" Wednesday, said Bill Lynch, director of investment at Hinsdale Associates.
"The question mark is what she says afterwards at the news conference as to how aggressive they're going to be the rest of the year in raising rates."
The Fed will release its latest economic forecasts Wednesday as well, including the outlook for the benchmark federal funds rate .
- Key figures around 2100 GMT -
New York - Dow: DOWN 0.2 percent at 20,837.37 (close)
New York - S&P 500: DOWN 0.3 percent at 2,365.45 (close)
London - FTSE 100: DOWN 0.1 percent at 7,357.85 points (close)
Frankfurt - DAX 30: DOWN less than 0.1 percent at 11,988.79 (close)
Paris - CAC 40: DOWN 0.5 percent at 4,974.26 (close)
EURO STOXX 50: DOWN 0.5 percent at 3,399.43
Tokyo - Nikkei 225: DOWN 0.1 percent at 19,609.50 (close)
Hong Kong - Hang Seng: FLAT at 23,827.95 (close)
Shanghai - Composite: UP 0.1 percent at 3,239.33 (close)
Euro/dollar: DOWN at $1.0604 from $1.0654 Monday
Pound/dollar: DOWN at $1.2151 from $1.2222
Dollar/yen: DOWN at 114.77 yen from 114.86 yen
Oil - Brent North Sea: DOWN 43 cents at $50.92 per barrel
Oil - West Texas Intermediate: DOWN 68 cents at $47.72 per barrel