The Dow Jones Industrial Average was down 786 points, or 2.2 percent, as of midday EST.
The S&P 500 was 1.5 percent lower in midday trading, after setting a record only the week before.
The Nasdaq composite was 0.9 percent lower.
In a different sign of worry, the yield on the 10-year Treasury dropped close to its weakest level in five months. It reached 1.21 percent as investors pushed for safer places to set their money.
Airlines, hotels and stocks of other companies that would get damaged the most by possible COVID-19 limitations were taking the heaviest losses, reminiscent of the early days of the pandemic in February and March 2020.
Airline operators and cruise liners including Southwest Airlines Co, Delta Air Lines Inc, United Airlines, American Airlines, Royal Caribbean Group, Carnival Corp, and Norwegian Cruise Line fell between 3.3 percent and 6.2 percent.
Wall Street's main indexes ended lower on Friday, with investors moving into defensive sectors on anxieties that a resurgence in COVID cases might delay a strong economic improvement and hinder a sharp market rebound from 2020 lows.
'Before the Delta variant started gaining traction, things were priced in for a very strong recovery,' announced David Grecsek, managing director of investment strategy and research at Aspiriant in New York.
'What we're seeing here is any data or news that's going to upset that sort of serene, low volatility, and high corporate earnings, market is going to react to that. But you don't want to see excess speculation. Some corrections are healthy.'
The drop further circled the world, with many European markets down over 2 percent, on concerns new virus variants are dragging hard especially on economies where vaccination rates are low.
The price of benchmark U.S. crude, in the meantime, sank over 5 percent after OPEC and allied countries agreed on Sunday to ultimately allow for higher oil production this year.
Specialists explained that Indonesia has become a new epicenter for the pandemic as outbreaks worsen across Southeast Asia.
Meanwhile, some athletes have tested positive for COVID at Tokyo's Olympic Village, including a US gymnast, with the Games due to open Friday.
'The more transmissible delta variant is delaying the recovery for the ASEAN economies and pushing them further into the doldrums,' announced Venkateswaran Lavanya, at Mizuho Bank in Singapore.
Even though vaccination rates are higher in the United States and some other developed economies, the tightly connected global economy means hits anywhere can quickly affect others on the other side of the world.
In Japan, the world's third-largest economy, the vaccine rollout came later than in other developed countries and has stagnated lately. Japan is totally dependent thus far on imported vaccines, and only one in five Japanese have been fully vaccinated.