US stocks have fallen sharply as investors recoiled from equities in the face of mounting tensions over Ukraine.

The Dow Jones Industrial Average dropped 153.68 points (0.94 per cent) to 16,168.03 on Monday.

The broad-based S&P 500 lost 13.72 (0.74 per cent) at 1,845.73, while the tech-rich Nasdaq Composite Index declined 30.82 (0.72 per cent) to 4,227.30.

The selling followed sharp losses in European equity markets.

“It’s all about the flight to safety,” said Michael James, managing director of equity trading at Wedbush Securities.

On Monday, President Barack Obama warned that the United States was planning economic and diplomatic sanctions to “isolate” Russia if it does not reverse its incursion into Ukraine.

“Everything has taken a back seat … to Russia and the potential impact for worldwide markets,” said James. “The safest thing to do is sell first and ask questions later.”

US banking giant Citigroup disclosed that it received subpoenas from two US agencies over its compliance with US bank secrecy and anti-money laundering laws. Shares fell 2.1 per cent.

Dow component Microsoft fell 1.4 per cent as new chief executive Satya Nadella unveiled a leadership shakeup which will see some veteran executives depart.

A report that Reynolds American is exploring a bid for tobacco rival Lorillard sent shares of the latter up 9.3 per cent. Reynolds gained 4.8 per cent.

Some stocks with exposure to Russia suffered, including Yandex, which operates Russia’s largest search engine. It plunged 14.1 per cent. Mobile TeleSystems OBSC, which provides mobile and broadband services in Russia, lost 7.6 per cent.

Bond prices jumped as investors sought safe-haven investments amid the Ukraine uncertainty.

The yield on the 10-year US Treasury fell to 2.61 per cent from 2.66 per cent, while the 30-year declined to 3.56 per cent from 3.59 per cent. Bond prices and yields move inversely.