Western leaders are threatening Russian President Vladimir Putin with economic penalties for his military intervention in Crimea, but the financial system already appears to be punishing him.
The Moscow stock market suffered its biggest plunge in five years on Monday with the benchmark MICEX losing 11 percent before recouping some of its losses in early Tuesday trading.
The ruble also hit a new low on Monday and Russia's central bank tried to contain the plunge by raising its key interest rate by one-and-a-half percentage points to 7 percent.
It was the largest interest rate hike since the global financial crisis in 1998.
Stocks in global markets stumbled across the board with investors selling off shares particularly in companies with exposure to Ukraine and Russia.
The Dow Jones industrial average shed nearly 1 percent on Monday.
But the European markets were hit harder, with the London benchmark Financial Times Stock Exchange ending the day one and a half percent lower, and Paris and Frankfurt stocks dropping 2.7 percent and 3.4 percent, respectively.
Stocks on the Ukrainian exchange in Kiev fell about 12 percent, and the country's currency fell to a new low against the U.S. dollar.
Ukraine faces a possible default on its debt as Moscow is cutting off aid to its limping economy.
In Asian markets, Seoul shares closed slightly lower on Tuesday after shedding nearly one percent on Monday while Tokyo and Hong Kong shares rebounded on bargain hunting after losing more than one percent each on Monday.
The uncertainties pushed oil prices higher, with Brent crude futures adding nearly 2 percent in London, and gold also gaining over 2 percent to 13-hundred-50 dollars an ounce to mark its biggest gain of the year.
Song Ji-sun, Arirang News.