World's Stock Markets Plunge

New York Mayor Michael Bloomberg, visiting London on Monday, urged British and U.S. officials to use caution when creating new regulation of financial markets.

Although both countries need to promote more transparency in financial dealings, he said, "rather than more regulation, I think what we need is smarter regulation." Bloomberg said a government overreaction that leads to excessive regulation could strangle the world's two most important financial centers, New York and London.

"There are plenty of emerging financial capitals that are gunning for us: from Dubai to Shanghai, and from Sao Paulo to Singapore," Bloomberg told a gathering of government and financial officials.

As the crisis continued to spread Monday, it roiled markets from the world's richest regions to some of its poorest.

Kuwait's stock exchange, the Middle East's second largest, sank by 3.45 percent. In the United Arab Emirates, Abu Dhabi's exchange dropped 5.6 percent.

Until recently, Persian Gulf leaders were mainly worried about how to wisely handle record oil profits as oil passed $140 a barrel. But now liquidity problems, withdrawal of foreign cash and fears of sagging demand for oil all were bringing the crisis home.

On Monday, crude oil fell below $90 a barrel, its lowest price since February, creating new worries for the region's leaders. Falling oil prices also were a factor in Monday's market dives in Russia, another country where wealthy investors and banks have suddenly found themselves caught in the economic contagion.

In Iceland, the government acted Monday to avoid what Prime Minister Geir Haarde said was a potential "national bankruptcy."

The country guaranteed all bank deposits and gave the nation's financial regulator broad powers to control operations of private banks.

Once strictly a fishing nation, Iceland has become a wealthy banking center in recent years.

In Latin America, the biggest stock market drop occurred in Brazil, the region's largest economy, where authorities halted trading twice during the day but could not prevent a decline of more than 10 percent. The Bovespa index fell more than 15 percent, the sharpest drop in a decade, before hovering around 10 percent down by the afternoon. Stock markets in Argentina, Mexico and Chile also suffered significant losses.

There was widespread concern that the worldwide financial crisis would slow demand for the wide range of commodities exported in the region.

Cody reported from Paris. Correspondents Mary Jordan in London, Craig Whitlock in Berlin, Joshua Partlow in Rio de Janeiro, Rama Lakshmi in New Delhi, Ellen Knickmeyer in Cairo and Blaine Harden in Tokyo and special correspondent Karla Adam in London contributed to this report.