Asian equities fell sharply on Tuesday led by technology shares as a widening conflict in the Middle East kept oil prices elevated, supporting the dollar ahead of an earnings season that will set the tone for the rest of the year.
Energy prices are back driving global markets as investors weigh the geopolitical developments in the Middle East and Russia-Ukraine, with Brent crude futures at $US105.9 ($A152) per barrel, near a two-week high.
Oil markets have been volatile as investors contend with the supply risks from attacks on Saudi Arabia while considering the prospect of additional diesel supplies from Russia.
"Markets are rediscovering that geopolitics matters most when it feeds back into inflation," said Charu Chanana, chief investment strategist at Saxo in Singapore.
"The renewed jump in oil is keeping pressure on yields and taking some shine off expensive growth stocks, especially as the Russia-Ukraine energy truce looks fragile and Middle East supply risks remain live."
In stocks, MSCI's broadest index of Asia-Pacific shares outside Japan fell 2.0 per cent in early trading, with tech-heavy South Korea's KOSPI sliding 6.0 per cent. Japan's Nikkei sank 2.6 per cent after returning from a holiday.
"A lot of it has to do with the chip selloff we saw on Wall Street overnight. That's bleeding into the Asian region," said Kyle Rodda, a senior analyst at Capital.com.
Overnight, the tech-heavy Nasdaq fell 0.5 per cent, dragged by chipmakers as investors fret about the durability of the rally in AI stocks amid higher competition between the US and China.
"When you add another jump in oil prices and some positioning ahead of inflation data and earnings, you have all the ingredients for a risk-off day in Asia," Rodda said.
The cautious sentiment helped keep the US dollar near an 18-month high. The euro last bought $US1.1157 ($A1.6016), while the Japanese yen was at 158.50 per US dollar.
Investors' attention will be on the slew of US bank earnings this week to get a gauge on the impact of the recent surge in Treasury yields on dealmaking, lending growth and funding costs across the industry.
A toxic mix of inflationary pressure from elevated energy prices and worries about ballooning government debt have triggered several bouts of bond selloffs in recent weeks, pushing borrowing costs to multi-decade highs across the globe.
Four of the six largest US lenders, JPMorgan Chase, Goldman Sachs, Citigroup and Wells Fargo will report results later in the day.
Anthony Saglimbene, chief market strategist at Ameriprise Financial, said investors will be looking to bank results for insights on whether households are still paying their bills, borrowing, and spending at healthy levels.
"The Q3 earnings season starts with stocks near record highs and little room for disappointment," he said.
"We believe for stocks to have an opportunity to grind higher from here, corporate America needs to turn in more A's and B's on their latest report cards and show they can maintain that momentum into year-end."
The benchmark 10-year yield was down 2.9 basis points at 5.214 per cent in Asian hours, staying close to the 24-year high of 5.364 per cent it hit last week.