European markets dropped shaply on Monday morning as fears over the collapse of the Turkish lira continued to spook investors.

All major European indexes were lower, with Spain and Italy leading losses in the first hour of trade.

Things recovered over the day, although almost all major indexes lost ground.

There were major drops in Asia overnight.

Turkey's currency collapsed by more than 25% against the dollar last week amid rising tensions between the US and President Recep Tayyip Erdogan over trade.

You can follow the progress of markets over the day on Markets Insider.

LONDON — European markets started the week deep in negative territory before recovering a little over the course of Monday as the crisis over the Turkish lira drags on investor sentiment around the world.

Asian markets fell sharply overnight. Those falls then spread into Europe, with major European share indexes losing as much as 1% in early morning trading.

Spain and Italy were the biggest losers, down about 1% each. Elsewhere, markets were seeing losses of about 0.5% to 0.8% as investors digested last week's 25% fall in the lira.

However, as the day progressed, losses started to pare, and by 3.30 p.m. BST (10.30 a.m. ET), losses on major indexes were limited to a maximum of around 0.5%. Here's the scoreboard:

The Turkish currency's slide comes amid rising tensions between the US and President Recep Tayyip Erdogan over trade. US President Donald Trump authorized increased tariffs against Turkey on Friday.

Erdogan exacerbated problems on Friday when he urged citizens to sell dollars and gold in exchange for lira. He doubled down over the weekend, saying there was a "currency plot" against Turkey and arguing that the fall in the lira was not connected to economic fundamentals.

The lira's slide continued Monday, with the currency dropping as much as 10% against the US dollar in early-morning trading before stabilizing.

Markets remain unclear on the Turkish government's response to the crisis, though Turkey's central bank did pledge to maintain stability in the financial system in a statement issued early Monday morning.

"The Central Bank will closely monitor the market depth and price formations, and take all necessary measures to maintain financial stability, if deemed necessary," the Central Bank of the Republic of Turkey said.

Those assurances did seem to arrest the fall of the lira somewhat but could not stop equity investors from selling.

The major concern around the lira is that its weakness will start to affect European banks. The eurozone's chief financial watchdog has become worried about the exposure of major European lenders — mainly Spanish and French banks — to Turkish debt.

"Because of the high participation of foreign banks and portfolio investors in Turkey, there are clear risks of contagion," Hasnain Malik, a strategist who is the head of equity research at Exotix, said in an email.

Capital Economics warned in a note on Friday that Spain, Italy, and France were likely to be the worst hit by the Turkish currency crisis because of the exposure of their banking systems. But the analyst house said the impact would be relatively limited because of the limited size of the Turkish economy.