The DAX closed 1.9% lower at 9017.79, its weakest level since Dec. 16. The index has lost nearly 7% so far this month as a standoff between Russia and the West in Ukraine has led some investors to scale back their exposure to European stocks, which hit six-year highs in early March.
Germany, which has strong trade links with Russia and Eastern Europe, and is a large consumer of Russian gas, has been hit especially hard.
Markets have grown increasingly nervous ahead of a referendum on Sunday over the future of Ukraine's majority-ethnic-Russian region of Crimea. German Chancellor Angela Merkel on Thursday said that the European Union was ready to impose sanctions on Russia if it doesn't change course in Ukraine.
Geopolitics is always a nightmare for markets, so when you get a potential confrontation on the horizon there's a tendency to overreact.Even so, the crisis in Ukraine has flared up at a time when many analysts are revising down their targets for European equities after a lackluster earnings season.
Wider European stocks also declined Thursday, with the Stoxx Europe 600 index losing 1.1%, and London's FTSE 100 down 1.0%.
Markets had steadied earlier in the session, shrugging off news that China's industrial output rose by 8.6% on the year over January and February, lower than an expected 9.5% expansion. But they started to fall once more as Ukraine concerns returned to the fore.Some previously bullish investors have scaled back their bets on European stocks.
"Increasing tensions in Ukraine made us close our overweight in European equities versus U.S. equities," said fund manager BNP Paribas Investment Partners on Thursday,
In bond markets, German bunds rallied. Ten-year yields, which fall as prices rise, sank 0.06 percentage point to 1.54%, the lowest since early February. U.K. and U.S. government bonds also surged as investors flocked to assets seen as safe.