Airlines and hospitality shares tumbled on Friday as Austria imposed a full Covid-19 lockdown and sparking fears that neighbours including Germany might be about to do the same.
Cases in Austrian cases have surged by 400% in the last month alone and while the infection rate in other European countries is not as high, the worry is that might change quickly.
"The situation is not quite so severe in other countries like France, Italy and Spain but that could change in the coming weeks, as we saw around the same time last year," said market analyst Craig Erlam at Oanda.
"High vaccination rates mean the link between case numbers and fatalities is far lower but the former is rising at a remarkable rate which is clearly making it very hard to ignore."
Joshua Mahony at IG said: "With Covid cases turning upwards across the likes of Germany, France, and Portugal, there is a fear that today’s announcement is indicative of where other European nations could find themselves in 2-3 weeks' time."
Austria’s Chancellor Alexander Schallenberg said the lockdown would run for a "maximum of 20 days", while also announcing it would now become mandatory for all Austrians to be vaccinated.
"We do not want a fifth wave," Schallenberg said and "Nor do we want a sixth or seventh wave.”
Austria is the fourth country to make vaccination mandatory and Schallenberg said fake news made up by anti-vaccinators meant too few people in the country had been jabbed.
Only 66% of the population have received any form of vaccination, one of the lowest rates in Europe.
Measures to restrict the movement of unvaccinated people had already been introduced, but this scaling up of the action shocked financial markets especially as Germany and Slovakiahacve also started ratcheting up their controls on internal movement.
Jens Spahn, the German health minister, today suggested it too was considering a full lockdown.
"We are now in a situation ... where we can't rule anything out," he said.
Greece meanwhile has barred the unvaccinated from indoor public spaces.
The worries took a toll on shares in the travel sector. British Airways owner IAG shed 4.7% to 147p, EasyJet dropped 4.6% to 544.6p and central Europe-focused Wizz Air fell 5% to 4,155p.
Premier Inn owner Whitbread, which has a subsidiary in Germany, meanwhile shed 2.5% to 3,007p.