Oil giant BP's share price has closed down 13% after falling at one stage to its lowest level in 15 months.
The sell-offs came as the firm's so-called "top kill" bid failed to plug the massive spill from its leaking well in the Gulf of Mexico.
BP said later that it hoped to contain the spill "within 24 hours" by sealing the fractured pipe with a cap.
Meanwhile, the US government said it would launch criminal and civil proceedings against BP.
An operation to cap the leak was launched on Tuesday using underwater robots.
BP's chief operating officer Doug Suttles said that "if everything goes well", the capping process could contain the spill within a day.
However, he warned that success was not guaranteed and asked people to "remember this is being done in 5,000 feet of water, and very small issues take a long time to fix".
And there remains fears the leak will now go on for at least another two months, until relief wells can be drilled.
The earlier top kill method that failed involved pumping mud into the well.
BP said that the total bill for the clean-up already stood at $990m (£684m).
The shares sell-off was BP's biggest one-day shares fall for 18 years, and wiped £12bn off its stock market value.
At its lowest point, the firm's share price was nearly 17% down on the day, but it recovered slightly by the close of trading.
BBC Business editor Robert Peston said it was "certainly not ludicrous to assume that the final cost for BP of this mess could wipe out at least an entire year's profit".
Announcing the criminal and civil investigations into the oil spill, US Attorney General Eric Holder said: "We will prosecute to the fullest extent of the law anyone who has violated the law.
"We will not rest until justice is done."
US President Barack Obama had earlier called the incident the worst oil spillage disaster in US history.
He also said his administration would prosecute over the oil spill if laws have been broken, and promised to change the law if necessary to prevent another such disaster.
The nearly $1bn clean-up cost to date includes $40m in economic injury claims, as well as grants to the authorities in the US states located in the Gulf area.
However, the latest fall in BP's shares suggests that markets now expect the ultimate cost to the company from the oil spill to be much more severe than this.
BP's share price closed on Friday at £4.95, but fell to £4.12 after the markets reopened on Tuesday - after a Monday bank holiday - before closing at £4.30.
BP's legal liability in the US is currently limited by law to a mere $75m, although this is expected to be increased to $10bn.
"The markets are pricing in an apocalyptic scenario," said Evgeny Solovyov, equity analyst at SG Securities in London.
He added that BP owns only 65% of the oil well, meaning its legal liability will be limited to just $6.5bn - although it could go higher if BP were found guilty of gross negligence or a criminal act.
"The markets seem to assume that BP will have to withdraw from America," he added, noting that there was talk among government lawyers about barring the oil company from US government contracts.
BP is also the biggest participant in deep sea drilling in the Gulf of Mexico, and therefore is likely to be hardest hit by the moratorium on this activity announced by President Barack Obama.
The sharp fall in BP's share price is bad news for UK pension funds, which are major shareholders in the firm.
The oil company has claimed that it pays £1 in every £7 of dividends that the pension funds receive from FTSE 100 companies.
Although the price change does not directly affect BP's ability to pay dividends, it does indicate that markets are anticipating a significant cut.
Some oil analysts have also speculated that if BP's share price continues to fall, the company may find that it becomes an affordable takeover target for some of its global rivals.
BP now hopes to cap the leak by using undersea robots to slice through the damaged pipe to make a clean cut that can be connected to another pipe, capturing the leaking oil.
However, this strategy may not stop the oil spill completely.
That will only happen once BP has finished drilling two new relief wells - something that is not expected to be ready before August.
The White House said the president had been informed that the flow rate could increase by as much as 20% until the containment device was applied over the leak.
University of Alabama engineering professor Philip W Johnson told Associated Press news agency that although he was hopeful the plan would succeed, if the new cap could not be placed on the fresh cut, "things will get much worse".
The system is similar to a previous containment dome plan that failed.
Meanwhile, the oil giant said it was stepping up its containment strategy.
It said that the total length of the boom - used to collect oil floating on the sea surface - would be almost doubled to 3.7 million ft.
BP also now plans to use hoses and other equipment deployed in the failed "top kill" strategy to siphon off more of the leaking oil.
"BP's priority is to keep as much oil as we can from causing additional harm to the Gulf, the shoreline and the people of the region," said BP Chief Executive Tony Hayward on Monday.
"This planned multi-step containment strategy is our best option for achieving this as we work hard towards completing the relief wells that will kill this well completely."