Adding to selling pressure was a decision by Standard & Poor's to further downgrade Greece's credit rating, saying plans to restructure the country's debt would entail a default.
Tokyo was 1.12 percent lower by the break as the economic uncertainty sent traders into the safe-haven yen, which hurts Japanese exporters.
Hong Kong fell 0.95 percent, Sydney shed 1.23 percent and Shanghai lost 0.75 percent while Seoul gave up 0.80 percent.
The White House and Democrats and their Republican rivals continue to bicker over a deficit-slashing plan that would allow a hike in the US debt ceiling, despite the government running out of money to pay its bills within a week.
The House of Representatives is due later Thursday to take up Republican Speaker John Boehner's plan for raising the $14.3 trillion debt limit, although it will likely fail due to a White House veto threat.
In anticipation of this, lawmakers are hunting for a compromise to avert a debt default, which threatens to have a devastating effect on global markets and the world economy.
Despite the August 2 deadline approaching with no sign of agreement, global markets have been relatively calm, with investors saying they are confident Congress will strike a deal.
"The scary part of the story is the fact that markets have not priced-in the US defaulting on its debt," said CMC Markets analyst Ben Le Brun.
"Should the unthinkable happen in the next week then a throwback to the chaos of 2008 would again become a reality," he told Dow Jones Newswires.
However, he added: "Should the majority of opinion be correct and the US does avoid a default, global markets do appear as if they are positioned for a relief rally of sorts."
The troubles sent Wall Street stocks lower for a third consecutive day, with the Dow plunging 1.59 percent, the S&P 500 2.03 percent lower and the Nasdaq diving 2.65 percent.
Adding to traders' woes was news of S&P's Greek downgrade further into "junk" territory. The move follows a similar decision by rival agencies Moody's and Fitch.
Last week, eurozone leaders agreed on a second multi-billion-dollar bailout for Athens that will see it roll over some debt and pay less interest on its first rescue package.
But S&P said "the proposed restructuring of Greek government debt would amount to a selective default under our rating methodology".
German Finance Minister Wolfgang Schaeuble also stoked fears when he said a rescue fund set up to help troubled economies did not have a "blank cheque" to buy back Greek bonds, referring to one of the key measures agreed at the crisis summit that drew up Greece's bailout.
The euro, which on Wednesday hit a four-week high of $1.4530, fell in New York to end at $1.4364. In early Tokyo trade the single currency stood at $1.4352, while it also fetched 111.87 yen, down from 111.97. It had been at 113.02 yen in Asia Wednesday.
The dollar was at 77.95 yen, from 77.96 yen.
New York's main contract, light sweet crude for delivery in September, fell 45 cents to $96.95 per barrel.
Brent North Sea crude for September shed 15 cents to $117.28.
Gold opened in Hong Kong at $1,614.80-$1,615.80 an ounce, down from Wednesday's finish of $1,623.00-$1,624.00. The precious metal surged to an intra-day high of Gold surged to a new record high of $1,628.05 in New York Wednesday.
Copyright AFP (Agence France-Presse), 2011