In Toronto, the S&P/TSX composite index tumbled 317.94 points to 14,490.15 in a decline in which all sectors were lower.
The loss, the worst since dropping almost 361 points on Jan. 5, was more than enough to erase all remaining gains to date on Canada's main index, which finished 2014 at 14,632.44 points.
New York markets also took it on the chin, with the Dow Jones Industrial average plunging 350.33 points or 1.95 per cent to 17,596.35. That was the Dow's worse loss of the year and also took that index below where it started 2015.
In percentage terms, both the Nasdaq and the S&P 500 did worse, falling 2.4 and 2.09 per cent respectively. The Nasdaq plummeted 122.04 points to 4,958.47, but remained in positive territory for the year, while the S&P 500 fell 43.85 points to 2,057.64, a little over a point in the red for 2015.
Craig Fehr, Canadian markets specialist with Edward Jones in St. Louis, said a major factor in the big drop on markets was the surprise decision by Greek Prime Minister Alexis Tsipras to call a referendum on austerity measures being demanded by Greece's creditors. Tsipras is urging people to reject those demands.
"That's really the curveball that was thrown to markets," Fehr said. "That's why we're seeing the big knee-jerk reaction lower today."
Prior to that, markets had started to price in or at least become comfortable with the prospect of a certain amount of brinkmanship between the two sides, he said.
"Certainly we know that the market hates uncertainty and there is a tremendous amount of uncertainty because nobody knows how this is ultimately going to play out. And again, that referendum really clouds things."
On commodity markets, the August oil contract lost $1.17 to US$58.46 a barrel, but gold — seen as a safe haven in times of economic turmoil — saw prices rise, with the August contract adding $5.70 to US$1,178.90 an ounce.
The loonie fell half a U.S. cent at 80.70 cents.
In Greece, both banks and the country's stock market were ordered shut until the referendum after talks aimed at freeing up 7.2 billion euros in rescue loans fell through.
Without that money, Athens appears certain to miss a $1.6-billion-euro payment due Tuesday to the International Monetary Fund.
Although the IMF is unlikely to declare Greece in default immediately, such a move could eventually lead to Greece's exit from the 19-member euro currency bloc and possibly the 28-member European Union itself.
But even if the worst does happen, Fehr doesn't subscribe to fears of significant damage to the world or eurozone economies, saying that Greece is only two per cent of the region's economy and its debt, although more than 300 billion euros, "is small on a relative scale."
And he noted that things have changed remarkably since the European debt crises of 2011 when several other countries including Italy, Spain, Ireland and Portugal were facing serous debt problems and struggling economies.
Those countries are all doing better now, so even if there were an exit by Greece, "there is very little incentive for other countries to try to follow."
Another important difference its that most Greek debt is now owned by the European Central Bank and the IMF, he added.
"So from that perspective, the risk that is borne is not really to the banking or the financial system, which is critically important, because that can allow the European banking system to continue to function at a reasonably normal level."