Jitters over a possible US-led military strike against the Syrian government knocked Asian equities to a seven-week low on Wednesday and pushed oil prices and safe-haven gold to multi-month highs.
An acute 'risk-off' mode also boosted the appeal of the Japanese yen, which held near a one-week high against the dollar and euro after having posted its biggest rally in more than two months.
Washington and its allies were gearing up for a probable military action against President Bashar al-Assad's forces, which were blamed for last week's chemical weapons attacks.
Western officials told the Syrian opposition to expect a strike within days, and US Defence Secretary Chuck Hagel said American forces in the region were "ready to go" if President Barack Obama gives the order.
The news on Syria overshadowed improving economic indicators, such as rising US home prices and Germany's Ifo business survey hitting its highest in 16 months.
Overnight, US and European stocks suffered their worst day since June, and investor nervousness was reflected in a nearly 12 percent jump on the CBOE volatility index, Wall Street's so-called fear gauge, to a two-month high.
"(The Syrian issue) is adding a layer of nervousness on top of the debate of US tapering which is having a very big impact on carry trade globally and having a very big impact on emerging markets," a senior trader at a foreign bank in Tokyo said.
Tokyo's Nikkei share average sagged 2.3 percent to a two-month low on Wednesday, while the yen was largely steady at 97.135 to the dollar and 130.075 to the euro after climbing more than 1 percent overnight.
MSCI's broadest index of Asia-Pacific shares outside Japan shed 1 percent, hitting its lowest level since July 9 and extending the previous session's 1.2 percent drop.
Emerging markets have been reeling for the past few weeks on expectations that the US Federal Reserve will reduce its $85 billion a month bond-buying programme as soon as next month.
As the selloff in deficit-stricken emerging market nations deepened, Indonesian exchanged traded funds saw heavy redemptions from US investors overnight.
Indonesian shares tumbled as much as 3.3 percent to a 14-month trough on