The chances of Britain actually leaving the European Union seemed so remote for weeks that many investors shrugged off the debate, convinced the country would vote to remain in the EU on June 23.
But with three polls this week showing the Vote Leave campaign with a lead of as much as seven points and a front-page endorsement of Brexit by The Sun, Britain's largest-selling newspaper, something akin to panic has set in across European financial markets.
On Tuesday, investors piled into sovereign bonds, seeking a safe haven from the turmoil. The yield on the German 10-year bond, considered a European benchmark, fell below zero for the first time, meaning investors were prepared to lose money by holding the bonds. Yields on British 10-year bonds, or gilts, also hit a record low of 1.146 per cent during the day.
Stock markets took a beating, too. The London Stock Exchange's FTSE 100 index closed down 2 per cent to 5,923.53, its lowest level in four months, while the German and French markets fell 1.4 per cent and 2.2 per cent, respectively. Amid all that, the pound lost 1 per cent of its value against the U.S. dollar.
"The moment we knew would come has finally arrived, when everyone goes: 'Crap, they are going to leave the European Union,'" said Chris Beauchamp, a senior market analyst at IG Group in London. "There has been a big shift. It has been quite remarkable, that's undeniable."
IG's Brexit binary option, which gives investors a chance to speculate on the referendum outcome, showed the probability of Britain leaving the EU as high as 41 per cent on Tuesday. It settled back to 37 per cent later in the day, but that was still up from 32 per cent on Monday and 25 per cent last week.
That reflects a change in sentiment in opinion polls and betting firms. For months, the trend line in more than 140 polls showed little movement, with both Vote Leave and Remain at 50 per cent. But in the past few days a "poll of polls" managed by What UK Thinks, part of a social research agency called Natcen, has shifted to 51 per cent for Leave and 49 per cent for Remain. However, there has been some discrepancy between telephone and online polls, suggesting problems in methodology: Online polls have tended to put Leave ahead, while phone polls have put Remain in front.
Luke Hickmore, an investment director at Aberdeen Asset Management in London, said bond yields could fall even further as investors become more uncertain about the referendum's outcome.
"If you watched gilts over the last few weeks, you'd think investors were getting pretty complacent. And I think what we've seen [Tuesday] is that complacency has just been blown away," Mr. Hickmore said. British gilts could drop to 1 per cent, he added, and "we could see German bonds at minus 0.1 per cent quite easily."
A senior member of the Vote Leave campaign, Douglas Carswell, an MP for the UK Independence Party, put a different spin on the falling bond yields, saying they were a positive signal.
"Bond markets looking good. Lot of international investors happy to buy UK gilts ahead of Brexit," Mr. Carswell said on Twitter.
Canadian Finance Minister Bill Morneau joined the fray on Tuesday, telling reporters in London that jobs at Canadian companies in Britain would be at risk if the country left the EU.
"For those tens of thousands of employees in those businesses, we can only say that [leaving the EU] puts them in a more vulnerable position," Mr. Morneau said after meeting with British finance officials.
Mr. Beauchamp urged caution, noting that polls were wrong about the Scottish referendum in 2014 and the British election last year.
"People remember we've been here before with referendums and that you should always follow the money, and that still tends to lean towards [Remain], even if the margin is tighter than it was," he said.
Polling experts also note that if the EU referendum is anything like the Scottish vote, there will be a last-minute surge to the status quo – the Remain side. Betting firms such as Betfair also still put the probability of a Remain vote at 60 per cent, although that was more than 80 per cent a couple of weeks ago.