Some bank letters of credit for exporters were not opened because of the uncertainty in global financial markets, with buyers nervous about buying wool they may not be able to on-sell.
There have also been reports that China, one of the world's major wool buyers, has all but stopped buying wool in Australia.
New Zealand Merino commercial manager Keith Ovens said there was a worry the financial uncertainty could mean retail sales drying up. He said the industry was navigating uncharted waters.
"It's total, around the world, and all because of the financial scene, and the supply of finance. It is also the unknown, what it will do to retail, manufacturing and purchasing."
On Tuesday, 90% of Tasmanian merino wool offered at sale was passed in after failing to meet growers' reserves, while 50% of the 2500 bales of New Zealand merino wool rostered for sale in Melbourne next week has so far been withdrawn.
In addition to the lack of sales, the market indicator for the Tasmanian offering fell by up to 15%, the largest one-day fall on record.
"It's a really serious situation," Mr Ovens said.
The market settled for a sale of New Zealand wool the next day, last Wednesday, with 54% of the offering selling and reasonable prices for 15 micron to 16.5 micron wool, he said.
But some lines of 17 to 18 micron fell in price by up to 15%.
"It wasn't good but there were some reasonable sales," he said.
Prices fell further at a sale of Australian wool on Thursday, with passing rates of 50% to 60%.
It was a marked turn around for the fine wool industry, which was enjoying strong demand and prices well above last year prior to the fall out from the financial crisis.
Wool Services International (WSI) also reports an impact on prices from the financial crisis at its New Zealand auction in Napier this week.
A weaker, and therefore more export friendly exchange rate, had no effect with prices tumbling across the board by up to 5%.
WSI reported in a statement that apart from Asian customers, there were few buyers active in the last two weeks.
"Most other markets have either withdrawn or significantly reduced purchasing activity due to continuing economic uncertainty," WSI said.
