The Australian share market plunged to a six-month low, suffering its worst one-day fall in nine months as investors feared the economic impact of Japan's worsening nuclear crisis.
Stock markets across the region were sharply lower.
The investor rout began after reports that another explosion and fire had pushed radiation to harmful levels at one of Japan's earthquake-hit nuclear plants.
The benchmark S&P/ASX200 index fell 97.7 points, or 2.11 per cent, to 4,528.7 points, while the broader All Ordinaries index lost 100.2 points, or 2.13 per cent, to 4,609.9 points.
On the ASX 24, the March share price index futures contract was 74 points lower at 4,535 points, with 167,423 contracts traded.
News that makes sense
Your trusted source for staying up-to-date with the world around you. Get free daily news updates and analysis, straight to your inbox.
The fall took the S&P/ASX200 index to its weakest level since September 3 last year when it finished at 4541.2 points. It was the biggest one-day fall since June 7 last year, when the market at that time fell on renewed sovereign debt concerns in Europe.
Japan's share market fared far worse, with the Nikkei index falling more than 12 per cent during intraday trading. The Nikkei was down by just under ten per cent in late trading.
Japanese Prime Minister Naoto Kan said on Tuesday that a fire has broken out at the number-four reactor in the earthquake-damaged Fukushima No.1 atomic power plant and radiation levels had risen considerably.
CMC Markets chief market strategist Michael McCarthy said investors had panicked in the wake of the comments.
Mr McCarthy said the negative sentiment would probably last at least a few days. "I've been talking to a number of big traders and investors.
They're expecting wholesale selling across all markets tonight," Mr McCarthy said.
"There's little doubt in my mind that this is a panic at the moment.
"We're certainly pricing a lot worse than has actually occurred. "Perhaps with hindsight, some of the comments that came from some of the leaders in Japan were a little intemperate in that they seem to have sparked quite a panic."
On the Australian share market, investors dumped uranium stocks.
Paladin Energy fell 69 cents, or 17.47 per cent, to $3.26. Peninsula Energy dumped 2.6 cents, or 30.59 per cent, to 5.9 cents.
Global miner BHP Billiton shed $1.12 to $42.97, and Rio Tinto descended $1.74 to $77.41.
Among the major banks, National Australia Bank retreated 40 cents to $24.28, Westpac weakened 28 cents to $22.59, ANZ surrendered 33 cents to $22.63, and Commonwealth Bank gave away 83 cents to $49.75.
Among other stocks, Origin Energy was steady at $15.66 as the head of the company said the nuclear crisis in Japan was likely to lead to increased energy demand for liquefied natural gas in the short term.
The price of gold in Sydney closed at $US1414.77 per fine ounce, down $US10.63 from Monday's close at $US1425.40. Gold miner Newcrest Mining was down $1.36 at $35.85.
Junior iron ore miner BC Iron was off three cents at $2.82 as Regent Pacific abandoned its friendly takeover bid, after the target's biggest shareholder said it was opposed to the plan.
National turnover was 4.48 billion shares worth $6.69 billion, with 1,207 stocks down, 165 up and 238 unchanged.
