Global equity markets slumped on Tuesday, denting the recent recovery in riskier assets as oil prices tumbled, reversing some of their recent bounce on signs a proposed output freeze by producers would not come to fruition.

After gains of more than 5 per cent on Monday, which had helped push a gauge of world equities up more than 1 per cent, both Brent and US crude were down more about 4 per cent.

Crude weakened after Saudi Oil Minister Ali Al-Naimi said he welcomed all sources of supply, while Iran was seen as unlikely to agree to an output cap.

The decline in crude weighed on both the energy and financial sectors on Wall Street. Concerns about bank exposure to the energy sector were highlighted by JP Morgan's announcement that it will put aside an additional $500 million to cover potentially bad loans to energy companies.

"You still see this hypersensitivity to what's going on with the price of oil and the market's reacting on a day-to-day basis to that," said Scott Brown, chief economist at Raymond James in St. Petersburg, Florida.

"It really shouldn't, but it gives you a sense of the nervousness out there."

US crude futures were last down 4.5 per cent at $31.90 a barrel and Brent lost 3.8 per cent to $33.36 a barrel. The commodity had shown signs of stabilisation above $30 a barrel recently on hopes a production freeze by major producers could be agreed upon.

The Dow Jones industrial average fell 170.93 points, or 1.03 per cent, to 16,449.73, the S&P 500 lost 19.49 points, or 1 per cent, to 1,926.01 and the Nasdaq Composite dropped 48.58 points, or 1.06 per cent, to 4,522.03.

European shares also moved lower on the crude weakness, along with and disappointing updates from Standard Chartered , down 6.7 per cent, and BHP Billiton, down 6.1 per cent. A weak sentiment reading of German manufacturers also raised concerns about the health of the region's largest economy.

Resources stocks, down 3.2 per cent, weighed heavily on European equity indices after the world's largest miner, BHP Billiton, posted its first loss in 16 years.

The pan-European FTSEurofirst 300 index of leading shares closed down 1.3 per cent. MSCI's index of world shares was lost 0.92 per cent.

In currency markets, the British pound remained vulnerable, a day after falling nearly 2 per cent, its biggest one-day percentage drop in almost six years, on worries Britain may leave the European Union. Sterling was last down 0.83 per cent at 1.403.

The euro also fell to $1.0987 on Monday, its lowest in almost three weeks, on fears Brexit could undermine the European Union. It was last down 0.03 per cent at $1.1023.

Investors' shift towards safer ground on Tuesday pushed the dollar lower against the yen, down 0.7 per cent to 112.12 yen after hitting a low of 111.75. The risk-aversion helped lift gold 1.2 per cent to $1,222.90 an ounce.

The dollar's index against a basket of six major currencies was little changed, up 0.01 per cent at 97.386.

Benchmark 10-year US Treasuries reversed earlier losses and were last up 10/32 in price to yield 1.7311 per cent.

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