Tokyo: Stocks slid while oil prices shot up on Monday, after Russia bloodlessly seized a part of Ukraine, escalating tensions between Russia and the West to a level not seen since the end of the Cold War.
U.S. stock futures fell 0.7 percent from a record high hit on Friday while Japan`s Nikkei average tumbled 1.3 percent. MSCI`s broadest index of Asia-Pacific shares outside Japan fell 0.6 percent.
European shares were likely to start weaker, with the spread-betters expecting Germany`s DAX to fall as much as 1.4 percent, France`s CAC 1.2 percent and Britain`s FTSE 1.0 percent.
Kiev has mobilised for war after Russian President Vladimir Putin declared his right to invade his neighbour, with Russian forces already controlling strategically important Crimea, an isolated Black Sea peninsula where Moscow has a naval base.
U.S. Secretary of State John Kerry condemned Russia`s move as an "incredible act of aggression" and the Group of Seven countries (G7) cancelled for now preparations for the G8 summit in protest.
"It`s a reaction to the escalation in tension in Ukraine over the weekend ... the traditional risk proxies are getting hit, and the safe havens are getting bid," said ANZ currency strategist Sam Tuck in Auckland.
The dollar dropped to as low as 101.255 yen, its weakest in almost a month, and last traded at 101.36 yen, about 0.4 percent below levels late last week.
Against the Swiss franc, another traditional safe-haven currency, the dollar slipped near Friday`s two-year low of 0.8782 franc.
Flight-to-quality bids also lifted gold 1.2 percent to USD 1,342 per ounce, near a four-month high of USD 1,345 struck last week.
"No one wants a full confrontation between NATO and Russia. That`s the worst scenario. Even Putin would probably not want it," said a senior proprietary trader at a Japanese bank.
"My hunch is that, in the end, the West will be resigned that Crimea falls into the hands of Russia, given the historical background. But it will take some time, at least a month, for the issue to be quieted down; until that will have happened, the markets will be unstable," he added.
Crimea is Ukraine`s only region with an ethnic Russian majority and was a Russian territory before Soviet leader Nikita Khrushchev handed it to Ukraine in 1954.
The euro also shed 0.2 percent against the dollar to USD 1.3778, slipping from Friday`s two-month high as the euro zone economy is seen as vulnerable because of its dependence on gas supplies from Russia, a part of which goes through Ukraine.
Fear of gas supply disruption as well as threats of war were enough to boost oil prices sharply.
Brent crude, the European oil benchmark, rose as much as 2 percent to a two-month high of USD 111.24 per barrel.
U.S. crude futures hit a five-month high of USD 104.65.
On top of concerns about a military confrontation, it was not clear if Ukraine`s new interim government, formed only about a week ago after pro-Russian former President Viktor Yanukovich had been ousted, can secure funds to avoid default.
Kiev has said it needs USD 35 billion over two years to avoid default, and may need USD 4 billion immediately. But Ukrainian Finance Minister Oleksander Shlapak said on Saturday the country is unlikely to receive financial assistance from the International Monetary Fund before April.
Concerns over Ukraine sent the 10-year U.S. debt yield falling to one-month low of 2.592 percent, compared with 2.66 percent late last week, ahead of the release of important economic data this week, including manufacturing data on Monday and payrolls data on Friday.
The Chinese yuan ticked down but held above an 11-month low hit last Friday after it suffered its biggest weekly loss ever last week, as the central bank stepped up its intervention to weaken the currency ahead of a key parliament meeting due to open on Wednesday.
The dollar traded at 6.1480 yuan in the onshore market, below Friday`s high of 6.1808.
Many Asian shares have been hampered by worries over a slowdown in China as Beijing tries to clamp down on shadow banking -- a step that many think China needs to take but can also harm the economy in the near term.
Copper sank to three-month lows as traders, already spooked by growing copper stockpiles in China, focused on data showing a modest cooling in the world`s top consumer of metals.
China`s factory activity shrank again in February as output and new orders fell, a private survey found on Monday, reinforcing slowdown concerns already fanned by an official report that found activity had slowed to an 8-month low.