The S&P 500 posted steep losses on Monday, marking it the worst start to a new year in more than a decade.

Investors dumped risky assets such as equities and piled into havens, bidding up prices of gold and Treasurys following a rout in Chinese shares overnight as well as heightened tensions between Iran and Saudi Arabia that sparked a global equity selloff.

See recap of live blog: U.S. stocks unravel on renewed China worries in 2016

The S&P 500 SPX, -0.84% fell 31.28 points, or 1.5%, to 2,012.66, led by a decline in financials, health-care and consumer discretionary stocks, while all 10 main sectors closed lower.

“It is not surprising to see such a selloff considering negative headlines from China and tensions between Iran and Saudi Arabia. What is surprising is that it is happening on the first day of the year,” said Ryan Larson, head of equity trading at RBC Global Asset Management.

“While trading desks are busier than they normally would be on Mondays, this is not a panic selling, it’s orderly. We are likely to see this kind of volatility a lot in 2016,” Larson said.

The S&P 500-tracking “SPY” ETF opened down nearly 2%. According to Bespoke Investment Group analysts, since the SPY SPY, -0.88% began trading in 1994, the ETF has opened lower on the first trading day of the year only twice, and never by more than 1%.

The Dow Jones Industrial Average DJIA, -0.46% closed off session lows, but still recorded a triple-digit loss. The blue-chip index fell 276.09 points, or 1.6%, at 17,148.94, led by a drop in DuPont Co. DD, +0.99% and J.P.Morgan Chase & Co. JPM, -1.14% .

Meanwhile gold prices US:GCG6 settled at two-week highs, while Treasurys rallied, as the uncertainty spurred a flight to havens.

The Nasdaq Composite COMP, -1.26% tumbled by 104.32 points, or 2.1%, to 4,903.09.

China slump: The sharp losses followed an almost 7% slide in China’s Shanghai Composite Index SHCOMP, +2.06% on the back of a weak manufacturing reading. The slide activated a new circuit-breaker system for Chinese stocks, halting trading on the mainland for the rest of the day. European stocks also slumped.

“It is unclear if the rout in China is more of a function of overvalued markets there or deteriorating economy,” said Maris Ogg, president at Tower Bridge Advisors.

“We believe China’s economy is growing at a much more modest 2%-4% range, not the 7% officials in China say. But that is not news to most investors. However, trading halts and market plunges did spook global investors,” Ogg said.

Opinion: China’s rigged markets could fall much further, much faster

Last summer, a severe selloff in China’s stock market sparked a global market rout, which was seen as one of the reasons the U.S. Federal Reserve kept interest rates steady at its September meeting.

Chinese officials announced plans for the circuit-breaker system in December, as a measure to prevent the wild swings that accelerated this summer’s stock-market crash. But analysts and investors say the circuit breaker could trigger more selling, as the freeze spooks investors and losses snowball, setting off the halt all over again.

U.S. stocks ended 2015 mostly lower after a losing session on Thursday. Markets were closed Friday for New Year’s Day.

Saudi-Iran tensions: Investors also monitored developments in the Middle East, where a rift between Saudi Arabia and Iran raised concerns about further disruptions to oil prices. Saudi Arabia over the weekend cut ties with Iran after attacks on its embassy in Tehran by people protesting the execution of prominent Shiite Muslim cleric Nemer al-Nemer.

Saudi Arabia executes prominent Shiite cleric

Oil prices CLG26, briefly spiked on the tensions between Saudi Arabia and Iran, but have since fallen and settled lower.

Data: In economic news, the Institute for Supply Management said its manufacturing index slipped to 48.2% last month from 48.6% in November. That’s the lowest reading since the last month of the Great Recession.

U.S. construction spending sank 0.4% in November to a seasonally adjusted annual rate of $1.12 trillion, the Commerce Department reported Monday. That was well below the 0.9% gain expected by economists surveyed by MarketWatch.

Movers: Pharmaceutical company Baxalta Inc. US:BXLT jumped 5.5% after speculation Shire PLC UK:SHP is close to completing a takeover of its U.S. rival.

Shares of Tesla Motors Inc. TSLA, -4.14% dropped 6.9% after the electric car maker released delivery numbers for the fourth quarter on Sunday.

Netflix Inc. NFLX, -2.82% slid 3.9% after Baird Equity Research downgraded the stock to neutral and said risk-reward is balanced following its recent strength.

Amazon.com Inc. AMZN, -2.25% fell 5.8% after Monness Crespi Hardt downgraded the stock to neutral from buy and suspended its price target.

Other markets: European stock markets SXXP, -0.07% skidded, with Germany’s DAX 30 index DAX, -0.04% off more than 4% and on track for its worst day since August.

The dollar traded mixed against other major currencies, although the ICE Dollar Index DXY, -0.14% was up 0.2% at 98.827.