In the West, the turmoil is largely being experienced as fear. But in emerging markets such as Russia, China and Brazil, economies are being hit as currencies tumble in value.
So are we heading for another crash and what does the future hold for the world economy?
Markets around the world are deep in the red
this year: two major U.S. indices are down by more than 6% since the start of the year. Oil prices are also hovering near their lowest level in over a decade.
CNNMoney's Fear & Greed Index
is indicating "extreme fear" in the markets as investors realize that central banks around the world -- especially China -- are powerless to bail them out. Other symptoms of panic include booming markets for U.S. bonds -- both traditional safe havens in a crisis.
And neither are the usual "bargain buyers," who have longer-term aims, jumping in to prop up stocks during big selloffs. Partly this is because state-owned investments, known as sovereign wealth funds and which have been built on oil fortunes
, are now keeping their hands in their pockets.
Is this the start of a new recession?
Hard to say. The pessimism was turbocharged last week when one economist warned of a "cataclysmic year
" ahead for markets and advised investors to "sell everything."
RBS economist Andrew Roberts said the world was now in a global recession and compared the market mood with that of 2008 before the Lehman Brothers collapse.
The big difference then was that emerging markets, such as Russia, China and Brazil, saved the world from collapse; now they can't help due to the weaknesses in their own economies. In the biggest of these, China, overseas investors deserted the country to the tune of $676 billion last year.
What's caused the chaos?
China's economy grew by 6.9% last year, but its sudden slowdown has emphasized how much the world had been relying on its apparently never-ending rise. Investors in major exporting countries such as Germany now worry
that the Asian country will buy fewer goods in the future. Concerns about transparency and competence in China are also growing, especially after the Communist regime halted trading on the stock market on January 7 in an unsuccessful attempt to overcome market volatility.
Coupled with China's slowdown is the plummeting cost of oil, although which came first is open to debate. The crash in oil prices keeps getting worse -- or better depending on your point of view -- and is now at its lowest level since 2003 at around $28 a barrel.
The lifting of sanctions on Iran has also sparked fears among investors that the Islamic Republic could flood the market
with oil in coming months -- despite falling demand amid the economic slowdown. Now there are fears of bankruptcies in the oil sector.
How are other emerging economies faring?
Russia is feeling the heat. The oil price crash from over $100 per barrel just 18 months ago has been disastrous for Russia. To balance its budget, the country needs to be able to sell oil for $82. This has hit the value of Russia's currency, the ruble, piling on the pressure for its economy: official statistics show that more than 20 million Russians
, 14% of the population, now live in poverty.
Brazil is also deep in recession
and the International Monetary Fund believes its economy will shrink by 3.5% this year, on the back of a 3.8% fall last year. Again this is caused by falling oil and commodity prices.
How are Western governments reacting?
We are nowhere near the situation where governments feel the need to pump money into economies, as many did in the wake of the 2008 crash either by nationalizing banks or printing money. In fact, governments are continuing their austerity policies that some economists believe are actually exacerbating low rates of economic growth.
It's true that in emerging markets the difficulties are very real, but in the West it is fear that is stalking the markets, and that may be self-fulfilling. CNN's Emerging Markets Editor John Defterios believes the gloom is overplayed. "So much of it is coming from the outside. Oil has driven down equities, but there is too much pessimism for the reality," he said.
Will there be a recovery or a crash?
Opinion is divided. Billionaire investor George Soros
is one who believes a new financial crisis is coming because of falling demand in China for oil and its attempts to devalue its currency.
Others though believe that the issues that sparked the 2008 turmoil -- principally, weakness of banks and an overheated U.S. mortgage market -- have been corrected.
Coupled with this is the fact that inflation and unemployment levels in many western economies are generally low, easing economic and political pressures. And while low interest rates, oil and commodity prices may hit producers like Russia, China and Saudi Arabia hard, for consumers it's great news, meaning lower gas and food prices. Enjoy it while it lasts!
However, debt levels remain high in many Western countries, putting many countries and consumers at risk of higher interest rates, should they rise significantly in the longer term.