US stocks have followed European markets lower after another big drop in world oil prices.

At the closing bell, the Dow Jones Industrial Average stood at 17,175.19, down 105.64 points (0.61 per cent).

The broad-based S&P 500 fell 13.03 (0.65 per cent) to 1,989.30, while the tech-rich Nasdaq Composite Index slid 48.44 (1.04 per cent) to 4,605.16.

WTI and Brent crude oil prices sank to new lows in more than five and a half years on worries about excess supplies. The drop pushed London’s FTSE 100 down 1.87 per cent, while equity markets in France and Germany fell more than 2.5 per cent.

“We seem to be hostage to the oil going down,” said Mace Blicksilver, director of Marblehead Asset Management.

Blicksilver was also cautious ahead of Wednesday’s policy announcement by the US Federal Reserve. Fed watchers are looking for clues on when the central bank will raise rates in 2015.

“The Fed cannot say anything that the markets are going to love,” he said.