LONDON (AFP) - Global stock markets plunged Monday as the dramatic collapse of US investment bank Lehman Brothers sparked steep losses across the financial sector, dealers said. Wall Street slumped in opening trade after a bankruptcy filing by Lehman Brothers and the distress sale of Wall Street rival Merrill Lynch. New York's Dow Jones Industrial Average shed 2.53 percent after European stock markets tumbled as much as five percent. Major central banks, led by the US Federal Reserve, rushed to inject tens of billions of dollars into money markets on Monday as Asian indices also closed sharply lower and Gulf markets lost up to seven percent in value. Elsewhere, the dollar fell heavily against the euro before rebounding in volatile trade, while oil prices slumped to seven-month lows under 93 dollars a barrel on fears about weakening energy demand. "The collapse of Lehman Brothers has sent a major jolt through global financial markets as it is by far the biggest victim of the credit crisis that started in August 2007 and had been considered too big to fail," said Global Insight economist Howard Archer. "There is obviously widespread concern about other banks' exposure to Lehman Brothers, not only in the US but also in Europe. Lehman's collapse also increases concerns that other banks could fail." Europe's main stock markets recorded falls of more than five percent before clawing back some ground in late afternoon trade. In London, banking group HBOS plunged 20.2 percent and Barclays shed 10.8 percent. German banks Commerzbank lost 11.7 percent and Deutsche Bank 8.24 percent in Frankfurt. In Paris, French peers Credit Agricole and Societe Generale saw their share prices slide by 11.9 percent and 10.9 percent respectively. Lehman Brothers filed for bankruptcy on Monday after a frantic weekend of negotiations failed to arrange a rescue. "This story is likely to dominate proceeding for the next few sessions, dragging financial stocks further in to the red, creating yet more fears over the strength of the global financial system," said CMC Markets dealer Ian Griffiths. "The news will totally eclipse the fact that oil is trading below 100 dollars per barrel which usually would have boosted sentiment." In late afternoon European trade, the Paris CAC 40 index of leading shares was down 4.32 percent, London was off 4.54 percent and Frankfurt lost 3.33 percent. Amid the fallout, the head of the British Bankers' Association, Angela Knight, told AFP that Britain's commercial banking sector was "safe and sound." German banks' links to the collapsed Lehman Brothers were "manageable and can be dealt with," said the German finance ministry, adding that it was in close contact with its international partners. Share price losses were also steep across Asia, with Taiwan stocks ending down 4.09 percent and Philippine shares off 4.2 percent. Sydney fought back slightly from earlier losses to end the day down 1.8 percent. Several major markets in the region, including Tokyo, Hong Kong, Shanghai and Seoul were closed for public holidays. In the markets that were trading, financial stocks suffered most. Lehman Brothers said that it intended to file for bankruptcy "in order to protect its assets and maximise value." Bank of America meanwhile said it was buying Merrill Lynch for 50 billion dollars in a transaction that creates the world's largest financial services company. "Wall Street is reeling this morning," said Chris Lafakis at on Monday. "Today will be difficult for equities as markets digest the events that unfolded over the weekend."