World markets fell further on Friday on fear of escalating tensions in Ukraine after a Malaysian Airlines plane crashed in the east of the country.

The U.S. believes Flight MH17 was brought down by a surface-to-air missile over a region that has seen heavy fighting between pro-Russian separatists and Ukrainian government forces.

Japan's Nikkei tumbled by 1% and Germany's DAX fell 0.6%, extending a slide that began late Thursday as news of the crash broke.

Markets in Malaysia fell 0.4%, with aviation stocks falling sharply.

It was the second tragedy to hit the airline, just four months after Flight MH370 disappeared.

Malaysia Airlines was the most actively traded stock in Kuala Lumpur, slumping 11%. Malaysia Airports was also among the biggest losers, sliding nearly 5%.

The Boeing 777 was on its way from Amsterdam to Kuala Lumpur with 298 passengers and crew on board.

Russian stocks and the ruble were also on the slide, extending Thursday's losses triggered by the announcement of new U.S. sanctions targeting leading Russian energy companies and banks.

The West is trying to pressure Moscow into ending its support for the separatists in Ukraine.

Investor sentiment took another knock late Thursday as Israel sent ground troops into Gaza, marking a significant escalation of hostilities.

U.S. stocks had a rocky session -- the Dow closed down almost 1%, the S&P 500 declined about 1.2%, and the Nasdaq slid 1.4%.

It was the biggest drop for the Dow in two months, and the S&P's fall was the steepest in three months.

Market anxiety was also reflected in gold prices, which edged 1.5% higher. The VIX index, a key measure of market volatility that's sometimes dubbed the "Fear Gauge," spiked nearly 36%.

U.S. futures were holding steady early Friday, and gold was edging lower, however, with some analysts saying the plane crash would lead to intense international pressure on Moscow to resolve the conflict in eastern Ukraine.