Europe kicked off voting across the continent in a contest in which rising populist forces are hoping to make significant gains, threatening closer EU integration.
Britain's EU poll is an extraordinary spectacle for a country that narrowly decided almost three years ago to leave the bloc and whose leader had vowed to avoid the vote.
"The markets (are) caught in a perfect storm of UK political turmoil, US-China trade warmongering and European economic softness," said Spreadex analyst Connor Campbell.
London's FTSE 100 shares index was down 1.5 percent in midday deals as the government postponed a crucial Brexit vote following an outcry from hardline Brexiteers over concessions made by May -- who faces intense speculation over her future.
The pound forged another four-month low at $1.2606 as May faces being ousted after her revised plan to push through her Brexit agreement, which sparked the resignation of cabinet member Andrea Leadsom.
- Economic woes -
=================
Eurozone indices took a battering also on Thursday, with Frankfurt and Paris losing 1.8 percent and 1.7 percent respectively in afternoon trading as survey data showed the bloc's economic growth remained "subdued" in May.
"The last thing the market needed on Thursday was a reminder of the eurozone's manufacturing and services sector woes," added Campbell.
"For the region as a whole, the former fell even further into contraction territory."
Frankfurt also tanked as the key Ifo survey signalled confidence among German business leaders struck its lowest level in more than four years in May.
The European single currency meanwhile touched a near one-month dollar low at $1.1129.
- Trade war dogs markets -
==========================
Asian and European equities also tumbled Thursday as China-US trade frictions continue to dog investor sentiment, particularly in the tech sector after Washington blacklisted Chinese giant Huawei.
Traders ran for the hills, with no signs of a let-up in the tariffs stand-off between the world's top two economies.
"Risk appetite has clearly been pushed lower by the multitude of events today," Rabobank analyst Jane Foley told AFP.
"In particular, fear of a tech war or even a cold war between the US and China is now receiving greater attention."
Tensions between China and the US have increased after Donald Trump banned telecoms giant Huawei from the US market and prevented American firms from selling to it.
The move has led a number of companies around the world to cut back their business with the firm, including Google, Japan's Panasonic and EE in Britain, among others.
The row, which has seen the trade war widen to also become a battle over technology, has hammered the sector with major firms seeing their valuations tumble in recent weeks.
Back in Asia, Mumbai's Sensex soared more than two percent to break the 40,000 for the first time ever as traders welcomed polls indicating business-friendly Prime Minister Narendra Modi's BJP were on course to win another majority.
- Key figures around 1100 GMT -
===============================
London - FTSE 100: DOWN 1.5 percent at 7,224.84 points
Frankfurt - DAX 30: DOWN 1.8 percent at 11,950.19
Paris - CAC 40: DOWN 1.7 percent at 5,287.26
EURO STOXX 50: DOWN 1.7 percent at 3,330.31
Tokyo - Nikkei 225: DOWN 0.6 percent at 21,151.14 (close)
Hong Kong - Hang Seng: DOWN 1.6 percent at 27,267.13 (close)
Shanghai - Composite: DOWN 1.4 percent at 2,852.52 (close)
New York - Dow: DOWN 0.4 percent at 25,776.61 (close)
Pound/dollar: DOWN at $1.2635 from $1.2706 at 2100 GMT
Euro/pound: UP at 88.13 pence from 87.84 pence
Euro/dollar: DOWN at $1.1134 from $1.1161
Dollar/yen: DOWN at 110.10 yen from 110.50 yen
Oil - Brent Crude: DOWN 74 cents at $70.25 per barrel
Oil - West Texas Intermediate: DOWN 41 cents at $61.01