Zoellick said a convergence of events in the United States and Europe had rattled investors in countries already struggling to cap sovereign debt issues and unemployment.
"And what we've seen is that confidence is a fragile element of how the market economy works," the World Bank Group president told an Asia Society dinner in Sydney on Sunday.
"And I think that those events combined with some of the other fragilities... have pushed us into a new danger zone. And I don't say those words lightly."
He added that the United States had contributed to the drop in confidence in the markets following the bitter debate in Congress to ensure that the country did not end up with a disastrous debt default.
"It's not that the United States faces an imminent problem," he said.
"Frankly, markets are used to the United States playing a leading role in the economic system and leadership and so when they saw the 'Sturm und Drang' in Congress and with the executive, it made them uncertain about, well does the United States really know where it's going? And is it going to get there?"
The problems were more serious in the eurozone, he said, where the processes for dealing with sovereign debt and some competitiveness shortfalls had lagged.
"We're kind of moving from drama to trauma for a lot of the Eurozone countries," he said.
Financial markets have suffered highly-volatile trading conditions in recent weeks, on mounting concern that the eurozone debt crisis and weak US economy could help see the world fall back into recession.
Britain's benchmark index ended the week up almost 1.4pc, the first time in three weeks the FTSE 100 has finished in positive territory over five days.
A 15-day ban on the short selling of financial stocks in France, Italy, Spain and Belgium by the European Markets and Securities Authority contributed to Friday's rally.
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