Media playback is unsupported on your device Media caption European Commission chief Jean-Claude Juncker: "In one night Europe suffered a major blow"

Stock markets in Europe and the US have fallen after Greece closed its banks and restricted cash withdrawals.

The moves by the Greek authorities came after the European Central Bank decided not to extend emergency funding.

London's FTSE 100 index closed down 1.97% and Germany's Dax index fell more than 3.5%. In the US, the Dow Jones closed 1.95% lower.

Bank stocks were among the hardest hit, with Commerzbank and Deutsche Bank losing 4.8% and 5.8% respectively.

Speaking after the London market had closed, chancellor George Osborne said that British banks had "dramatically less" exposure to Greece than in 2012.

"I think they are well prepared for whatever eventualities unfold," he told the House of Commons.

Mr Osborne also warned that the Greek crisis was "one of the biggest external economic risks to the British economy".

"I don't think anyone should underestimate the impact a Greek exit from the euro would have on the European economy and the knock on effects on us," he added.

The Athens Stock Exchange and Greek banks are closed all week.

On the money markets, the euro lost ground against other major global currencies.

Meanwhile, political developments have continued, with the European Commission chief, Jean-Claude Juncker, saying he feels "betrayed" by the "egotism" shown by Greece in the failed debt talks.

Market moves

London's FTSE 100 share index fell 133.22 points to 6,620.48 with other European markets seeing even bigger falls. Earlier in Asia, Japan's Nikkei index fell nearly 3%.

On the currency markets, the euro saw volatile trading in Asia, falling by 2% at one point. However, it later recovered some ground, with the euro down 0.12% against the dollar at $1.1179.

The euro weakened against the pound, with one euro now worth £0.7090, while the pound buys €1.4108.

Oil prices headed lower. Brent crude oil futures fell 1.3% to $61.96 a barrel.

Bond yields (an indication of borrowing costs) for Italy, Spain and Portugal - which are considered some of the weaker eurozone economies - rose.

In contrast, German bond yields fell. German bonds are seen as safer investments in times of crisis.

Greece crisis - live coverage

'Out of control'

Greece is due to make a €1.6bn payment to the IMF on Tuesday - the same day that its current bailout expires.

Last week, talks between Greece and the eurozone countries over bailout terms ended without an agreement, and Prime Minister Alexis Tsipras then called for a referendum on the issue to be held on 5 July.

At the weekend, the Greek government confirmed that banks would be closed all week, and imposed capital controls, limiting bank withdrawals to €60 (£42) a day.

"Greece's decision to shut banks over the weekend is just the most dramatic element of a crisis that has spiralled out of control," said Chris Beauchamp, senior market analyst at IG.

Image copyright Reuters

Analysis: Robert Peston, BBC economics editor

There is zero chance of the European Central Bank turning Emergency Liquidity Assistance back on - life-saving lending to banks - unless Greeks give an affirmative vote to a bailout proposal from the rest of the eurozone and the IMF, which Juncker sees as a proxy for Greece's monetary future.

As for Athens, most of the Syriza government detests the bailout offer - for the way it pushes up VAT and cuts pensions.

So we will have the bizarre spectacle of a Prime Minister, Alexis Tsipras, arguing both against the bailout and for remaining inside the eurozone - so goodness only knows how he will vote.

And Greek people will be torn between fear and loathing of bailout proposals that will damage the living standards of many of them, and fear and loathing of abandoning the euro and seeing their banks closed sine die.

Read Robert's blog in full

Greece's temporary bank closure is sending investors' money into other European markets, which experts say will continue in the short term, as investors worry about a potential massive default in the country.

They are also concerned that other European economies could suffer similar debt problems, which would further rattle the financial stability in the region. Market watchers say investors are seeking solace in assets which they consider safe bets in times of crisis.

"To a certain extent, we do expect markets to react to this, with peripheral bond yields probably higher, the euro a little bit lower throughout the week and some strength in the safe havens like the Swiss franc and the British pound," David Stubbs from JP Morgan Asset Management told the BBC's Today programme.

But despite worries about the deepening crisis in Greece, market watchers say that European markets are equipped to handle the short-term volatility.

Mr Stubbs added that because the economic situation in the eurozone had improved since 2011, the region's economy should be able to weather the storm.

Others agree that the volatility could be short-lived, as investors digest each turn in the long-running saga of the Greek debt crisis.

"Markets have a habit of reacting with fear first, and reassessing later," said Michael Hewson, chief market strategist at CMC Markets.

He believes many investors might ride this volatility out.

Image copyright Reuters Image caption Greek banks will stay closed until 7 July

At the scene: Joe Miller, business reporter, Athens

After a tumultuous weekend, many Athenians are returning to work on Monday - despite the closure of the country's banks.

If not for the doom-laden headlines displayed across newspaper kiosks, and the modest queues outside ATMs, you'd be forgiven for thinking it was just a normal weekday in the Greek capital.

TV crews and tourists occupy the central squares in the searing heat; the bars and cafes are as busy as ever.

But there is a sense of unease - Greece's economy may just manage to function until Sunday's planned referendum, but Athenians are all too aware that the country's future still hangs in the balance.

A rally in support of the "no" campaign - affiliated to the anti-austerity Syriza party - is due to take place this afternoon, and there will undoubtedly be a counter-protest at some point.

However, most of the Athenians I've spoken to are weary - after the peaks and troughs of the last few months, they've learned to take each day as it comes.

Potential deal?

Other experts believe that despite the continuing uncertainty and the missed deadlines, Greece could still reach a deal that would avert a financial disaster.

"There is still a feeling within financial markets that a deal can be done here to keep Greece very much within the European Union," Paul Kavanagh, chief executive at Petronas Partners, told the BBC Business Live programme.

He is watching Italian and Spanish bond market action, adding, "Yes, those yields have risen - but they're not in panic territory yet."