As of 2:40 p.m. Hong Kong time, Japan led the market selloff as the Nikkei 225 plunged 2.53%, its worst loss in five months, while the Topix Index dipped 2.0%. South Korea’s Kospi declined 1.47%.

Hong Kong’s Hang Seng index recorded sharp losses and dropped 2.67%, hit by fears over the new variant and ongoing concerns about China’s embattled property sector.

Mainland China fared slightly better with the Shanghai Composite Index and the CSI 300 down 0.54% and 0.74%, respectively.

In Europe, the Stoxx 600 index fell by as much as 3.5% early in the morning, before recovering a little, with France’s CAC 40 down 3.5%, Germany’s DAX down 2.8%, and the U.K.’s FTSE 100 down 2.7%. U.S. futures were also looking grim, with the Dow on track for a 2.1% drop at the open.

The selloff is “the result of the new COVID variant… alongside news of Chinese regulators asking Didi to delist from U.S. exchanges, then magnified by reduced liquidity [due to] the U.S. Thanksgiving holiday,” says Alvin Tan, head of Asia FX strategy at RBC Capital Markets. The discovery of the new variant “sent Asian investors scurrying for the exit door,” wrote Jeffrey Halley, senior market analyst of Asia Pacific at FX firm OANDA, in a Friday note.

The new variant—currently known as B.1.1.529—was first discovered in South Africa on Nov. 11. The country has detected over 1,000 cases of the new variant, mostly clustered in the province of Gauteng, one of its wealthiest and most economically vibrant regions. It accounts for a majority of new infections in the country, outpacing the highly-transmissible Delta variant.

Two cases of B.1.1.529 were discovered in Hong Kong earlier this month. A man flew into the city from South Africa, and reportedly transmitted the virus to another quarantining traveler who was staying across the hall. The new strain has also been detected in Botswana, one of South Africa’s neighbors to the north, and in Israel. Belgium has identified two suspected cases.

As of mid-Friday, Singapore, Japan, India, Israel, Germany, France, Italy, the Netherlands, Austria, the Czech Republic and the U.K. had imposed new restrictions on travelers from South Africa, while Australia says it’s closely monitoring the situation and European Commission President Ursula von der Leyen said the Commission would propose closing the EU to air travel from southern Africa.

The new travel curbs threaten to derail South Africa’s tourism season. The South African rand at one point fell 1.7% to 16.2391 against the USD, its lowest level in over twelve months.

Travel stocks in Asia were hard hit by the Friday selloff. Singapore Airlines dipped nearly 4%, while Australia’s Qantas Airways plunged more than 5.5% and Japan Airlines plummeted 6.5%. Technology stocks were also hurt by the news of Chinese regulators asking ride-sharing firm Didi to devise a plan to delist from the New York Stock Exchange.

European carriers fared even worse. Lufthansa’s shares dropped 11% and those of British Airways and Iberia-owner IAG by 14.5%. The U.S.’s Delta was on track for a 9.25% drop.

Little is known about the variant, other than it has nearly 50 mutations that differentiate it from the original COVID virus discovered in Wuhan, China two years ago. Thirty-two of those mutations are to its spike protein, the vehicle by which the virus penetrates the body’s cells and the part of the virus that most vaccines target.

Still, markets are “taking no chances,” Halley says, with haven currencies like the U.S. Dollar, Japanese Yen and Swiss Franc rallying. U.S. 10-year bond yields have moved sharply lower to 1.541%; and oil has slumped, with U.S. West Texas Intermediate (WTI) crude down 5.4% to $74.14 a barrel and Brent crude falling 5.6% to $77.59 a barrel.

“In other words, [this situation] is a classic risk-off… a flight to safety move,” writes Halley.

In a Friday note, Michael Hewson, chief market analyst at CMC Markets, called the market reaction “outsized…with a surge into bonds, sending yields plunging and gold higher.”

The World Health Organization (WHO) is holding a special meeting on Friday to discuss the new strain and its potential to alter vaccines, treatment plans, and diagnostics. Dr. Maria Van Kerhove, the WHO’s COVID-19 technical lead and an infectious disease epidemiologist, said monitoring is underway to better understand B.1.1.529’s mutations but indicated that it will take weeks to determine the variant’s vaccine resistance and transmissibility.

All “eyes will be on how severe [the strain] is and whether it completely evades vaccines,” wrote Deutsche Bank’s Jim Reid in a Friday note. “Suffice to say at this stage, no one in [the] markets will have any idea which way this will go.”

Also on Friday, Merck announced that its antiviral “COVID pill” molnupiravir, which was previously billed as halving the risk of hospitalization and death for COVID patients, is actually only 30% effective. Merck’s shares fell more than 4% on the news. But shares in vaccine maker Moderna rose more than 8% on the news around the new variant.

This article was updated on Nov. 26 to update the market figures and include more information.