Tokyo: 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 U.S. 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 U.S. 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 .VIX, 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 U.S. 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 .N225 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 .MIAPJ0000PUS 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 U.S. Federal Reserve will reduce its $85 billion a month bond-buying program as soon as next month.
As the selloff in deficit-stricken emerging market nations deepened, Indonesian exchanged traded funds saw heavy redemptions from U.S. investors overnight.
Indonesian shares .JKSE tumbled as much as 3.3 percent to a 14-month trough on Wednesday, while Philippine stocks .PSI sank 5.6 percent to a nine-month low.
Indonesia's central bank board will meet on Thursday in a surprise move amid widespread speculation it will have to raise interest rates again to defend the fast-falling rupiah, now its lowest since April 2009.
The Indian rupee hit a record low on Tuesday and posted its biggest single-day fall in nearly 18 years after the lower house of Parliament approved a nearly $20 billion plan to provide cheap grain to the poor, raising concerns the fiscal deficit will blow out even further.
The Thai baht fell to as much as 32.20 per dollar, its weakest level in three years.
Against a basket of major currencies, the dollar .DXY held steady at a one-week low.
The heightened geopolitical risk in the Middle East drove the prices of gold and oil higher, however.
Brent crude prices advanced 1.8 percent to a six-month high of $116.37 a barrel, extending Tuesday's 3.3 percent surge - the biggest one-day percentage gain in nearly 10 months.
Gold was steady after climbing as much as 1.4 percent on Tuesday to a more than three-month high.