Switzerland's largest bank's share price fell 7.9 percent to 15.22 Swiss francs a piece in late afternoon trading as the Swiss stock exchange's main SMI index slumped 1.3 percent.
The steep fall came after UBS reported that its net profit tumbled 64 percent from a year earlier to 707 million Swiss francs (€624 million, $742 million) in the first quarter of 2016.
That was far below the expectations of analysts polled by the AWP financial news agency, who had anticipated a net profit of 815 million Swiss francs.
Income slumped 22 percent to 6.8 billion Swiss francs in the same period.
The bank said it was being squeezed by low interest rates, a strong Swiss franc and nervous investors staying out of the markets.
A negative financial market, "substantial volatility", and underlying economic and political uncertainty had frightened away investors, leading to "abnormally low" trading volumes in the first quarter, UBS said in a statement.
The bank's trading income plunged a full 53 percent in the first quarter, to just over 1 billion Swiss francs, it said.
But UBS chief executive Sergio Ermotti insisted the bank had performed well despite the difficulties.
"In view of exceptionally low client activity levels, we continued to manage our resources effectively while making progress on costs," he said.
One bright spot in the earnings report was that UBS's private banking businesses attracted an unexpected amount of net new money, totalling 29 billion Swiss francs, the highest amount since 2008.
But although some factors had stabilised, the underlying economic and political risks were still scaring away investors, the bank said, adding that they are unlikely to be resolved in the "foreseeable future".
Low interest rates and the strength of the Swiss franc still presented headwinds, it said. In addition, changes to the international banking rules would likely require the bank to further raise its capital and costs.
"UBS continues to execute its strategy with discipline to mitigate these effects and is well positioned to benefit from even a moderate improvement in conditions," UBS said.
UBS is far from the only bank suffering the impact of nail-biting investors, and analysts said its performance was considered "good", considering the circumstances.
"We suspect that UBS' performance will be among the better of the banks and the strong capital and excellent net new money flow probably still give the shares some 'safe haven' status within the sector," Baader Helvea analyst Tim Dawson said in a research note.
"The question is whether one should be invested in the sector at all," he added.
Others meanwhile said UBS's results showed the bank still had cost-cutting work to do.
"Unless the revenue environment improves significantly, we believe UBS needs to work more on improving its cost base," Vontobel analyst Andreas Venditti said in a note.
But he added that "in a still uncertain environment, we continue to believe UBS is better positioned than most peers due to a strategy focused on its leading WM (wealth management) business."
UBS has undergone a massive restructuring, including some 10,000 job cuts, to centre its activities around wealth management, which is less sensitive to market fluctuations than business banking.
On Tuesday the bank said it had achieved savings of 1.2 billion Swiss francs since 2013, and said it was "on course" to achieve its target savings of 2.1 billion by the end of 2017.