By Riva Gold and Aaron Kuriloff 

The rout in U.S. and European stocks deepened Monday as the aftershocks of the U.K.'s vote to leave the European Union rippled through financial markets.

The British pound fell to a three-decade low and investors sold financial shares on both sides of the Atlantic. Government bonds and gold rallied.

Major U.S. stock indexes that recently were approaching record highs have erased weeks of gains in the past two sessions. Questions about the impact of the U.K.'s departure added to persistent concerns about the world's economy and the ability of policy makers to stoke growth and inflation.

Investors and analysts said the fallout could include lower growth, lower interest rates and a stronger dollar that could pressure exporters' profits. Some have slashed near-term forecasts for U.K. and eurozone growth ahead of what several said could be a prolonged period of political and economic ambiguity.

"There's no playbook for this," said Bill Nichols, head of U.S. equities at Cantor Fitzgerald.

The Dow Jones Industrial Average declined 286 points, or 1.6%, while the S&P 500 dropped 2.0% and the Nasdaq Composite fell 2.6%.

The Stoxx Europe 600 slid 4.1%, to its lowest close since February.

The British pound fell 3.7% against the dollar to as low as $1.3121, its weakest since 1985, even after British Chancellor of the Exchequer George Osborne issued a statement reassuring investors that the U.K. economy remained resilient and its banks and financial system were healthy.

Investors face a range of question marks following the vote, including the makeup of Britain's political leadership, the country's future relationship with the EU, the long-term impact on business confidence and investment in Europe, and the response it will prompt from politicians and central banks around the world.

"There are just so many moving bits...it's a highly uncertain future," said Mark Harris, head of multiasset at City Financial in London. "To say that I'm stunned is an understatement," he added.

Bank shares were hard hit Monday amid concerns that the U.K.'s exit could hurt lenders operating in the region and lengthen a period of ultralow interest rates that has pressured bank profits. Expectations for the Federal Reserve to raise interest rates this year have fallen sharply.

Financial shares in the S&P 500 fell 3.1%. Bank of America fell 6.9%, Citigroup lost 4.8% and Morgan Stanley shed 3.9%.

The Stoxx Europe 600 Banks index fell 7.7% to its lowest close since 2011 as shares of Barclays PLC declined more than 17%, and the Royal Bank of Scotland Group PLC fell 15%.

Investors sought safety in government debt and other havens. Yields on 10-year U.K. government bonds fell below 1% for the first time on record, according to data from Tradeweb.

The yield on the 10-year U.S. Treasury fell to 1.456%, from 1.577% Friday. The yield's record-low close was 1.404%, set in July 2012. Yields move inversely to prices.

The only two sectors to rise in the S&P 500 were utilities and telecom, which are often used as a proxy for bonds. Investors have poured into the relative safety of such dividend-paying stocks, sending utility shares up 17% in 2016 and telecom shares up 18%.

The euro fell 0.9% against the dollar to $1.1015, while the dollar fell 0.2% against the yen to Yen102.0190.

Last week's rally ahead of the results intensified the pace of stock market declines, said Bruce Bittles, chief investment strategist at Robert W. Baird & Co. Despite worries about valuations and the impact of a strengthening dollar on exporters' profits, low yields in the bond market leave few alternatives for investors outside of equities.

"Stocks don't have much competition," he said. "Very low rates, very low inflation and a friendly monetary policy backdrop is going to drive the market."

Asian shares had a modest rebound following heavy losses on Friday. The Nikkei Stock Average gained 2.4% after an adviser to Prime Minister Shinzo Abe said Monday that Japan now has a "little more ground" to rationalize intervening in the currency markets.

The Shanghai Composite Index added 1.5% after the People's Bank of China weakened the yuan by the most since August, while shares in Hong Kong edged down 0.2%.

In commodities, U.S. crude oil fell 2.8% to settle at $46.33 a barrel, while gold rose 0.2% to settle at $1,324.70 an ounce, following its biggest one-day gain since 2013.

Write to Aaron Kuriloff at aaron.kuriloff@wsj.com and Riva Gold at riva.gold@wsj.com

(END) Dow Jones Newswires

June 27, 2016 15:50 ET (19:50 GMT)

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