Wells Fargo equity strategist Christopher Harvey said: "The short-term read on Omicron's lethality is okay (so far), but it has not paid to be too optimistic on early Covid results. However, in the long term, we are encouraged by the tendency of viruses to become more contagious but less deadly as they evolve. "

Meanwhile, attention will be drawn this week to the upcoming US CPI report, which is expected to show the largest yearly growth in decades. If this happens, the Fed will be forced to tighten policy more quickly.

But the uncertainty surrounding the latest outbreak will continue to plague the markets over the next few weeks, especially after mixed economic data last week alarmed investors, prompting them to move away from high-risk assets to safer havens. Bitcoin, for example, collapsed over the weekend, reflecting the highest macroeconomic uncertainty in stocks.

Ryan Detrick, chief market strategist at LPL Financial, said: "Although we do expect this volatility to continue, it very well could be a buying opportunity. We've been living with Covid-19 for more than 20 months now. We've seen several variants and managed to move forward, and we expect a similar playbook to work once again. Admittedly, we don't know how effective current vaccines are against omicron, or how transmissible it is, but we do know that the appetite for another nationwide shutdown is quite low and that these questions should be answered over the coming weeks. "

Deutsche Bank research leader Jim Reid also said: "As it stands, the Fed is likely to accelerate its contraction next week."