Major markets in Asia plunged after Monday’s overnight sell-off on Wall Street. At one point, the benchmark Nikkei 225 index plummeted 7%, the biggest one-day drop since 1990, before recovering slightly to close 4.7% down at 21,610.24 points.

In a trading horror story, the boards in Hong Kong, Seoul and Shanghai all turned red with the Hang Seng Index ending up in free fall. At the close, it was more than 5%  down at 30,595.42 , while the Shanghai Composite Index dropped 3.4% to 3,370.65, its biggest single-day decline for nearly two years.

The rout continued in Singapore, where the Straits Times Index edged down 2.20% to close at 3,406.38.

“Since last autumn, investors had been betting on the goldilocks economy – solid economic expansion, improving corporate earnings and stable inflation,” Norihiro Fujito, a senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities, told Reuters. “But the tide seems to have changed.”

The Korea Composite Stock Price Index, or Kospi, faired slightly better but still closed 1.5% down at 2,453.31. In Australia, the main ASX dropped 3.2%, shredding A$60 billion (US$47 billion) in value.

Shanghai also took a major hit with the blue-chip CSI300 index dropping 2.9% at 4,148.89, while the start-up board index, or ChiNextp, plunging 5.3% to a three-year low.

“There’s really nowhere to hide,” Hao Hong, the chief strategist at China’s Bank of Communications, told CNBC. “If you review the market, across the board, there is very heavy selling pressure.”

In India, the influential Senex on the Bombay Stock Exchange dropped more than 3% after the opening bell, wiping off more than $84 billion. It later recovered slightly to close down 1.61% at 34,195.94.

“This was volatility unleashed,” Jack Ablin, the chief investment officer at Cresset Wealth, told The Guardian newspaper. “It’s partially fear of interest rates, partially this new Fed chairman Jerome Powell, partially the market is overvalued relative to fundamentals.”

The tumble across Asian markets was triggered after US stocks suffered their worst day in more than six years on Monday.

Analysts said the sell-off was sparked by concerns of higher interest rates after the Dow Jones Industrial Average index plunged 4.6%, or 1,175 points, to close at 24,345.75.

In a move to calm the markets, the White House tried to reassure Wall Street, pointing out that “long-term economic fundamentals remain exceptionally strong.”

Still, investors appear to be reacting to developments in the US, and the global economy as a whole, amid fears of higher borrowing costs. On Friday, the US Labour Department released employment numbers which showed stronger growth in real wages.

“Economic news from the US has been stronger than anticipated,” David Kuo, the chief executive of financial services advisory Motley Fool, told the BBC. “So, perversely, the market correction has been caused by positive economic news.”

Monday’s decline was the biggest percentage drop for the Dow since August 2011, when markets fell in the aftermath of “Black Monday.” A reference to the day that Standard & Poor’s downgraded its credit rating of the US.

“When you get this kind of sell-off, it kind of feeds on itself,” Michael P. Ryan, the chief investment officer for the Americas at UBS Wealth Management, told the New York Times.

The main concern is that potentially higher interest rates in the US will curtail the bull run on Wall Street, with the bond market benefiting from a rate rise.

But global investors are also trying to pick the right path through a changing economic environment. After years of sluggish growth, key economies in Europe and Japan appear to be building momentum.

“This isn’t a collapse of the economy. This isn’t a concern that markets aren’t going to do well,” Erin Gibbs, the portfolio manager for S&P Global Market Intelligence, told the BBC. “This is concern that the economy is actually doing much better than expected and so we need to re-evaluate.”