Oil prices extended last week's gains after Iran seized a British tanker in the Gulf, fuelling fresh concerns about supplies and a possible conflict in the tinderbox Middle East.
Traders took a step back after last week's gains as the New York Federal Reserve tempered comments from its president, John Williams, who had suggested the central bank would cut borrowing costs by 50 basis points at its policy meeting this month.
"Stocks are on the back foot as the market pares expectations for how deep the Fed will cut rates," said Neil Wilson, chief market analyst at Markets.com.
"Expectations for a 50 (point) cut are diminished and the market is now looking to the European Central Bank this week to see how dovish they go."
Bets that the Fed will only reduce rates by 25 points provided support to the dollar against most high-yielding, riskier currencies.
On equity markets, Tokyo ended 0.2 percent lower and Hong Kong was off 1.4 percent.
Shanghai fell 1.3 percent, with liquidity hit as Chinese investors piled their cash into companies listed on the country's new Nasdaq-style board.
Twenty-five stocks debuted on the Shanghai Stock Exchange's Sci-Tech Innovation Board -- dubbed the STAR Market -- in which listing and trading rules have been eased to help channel funding to start-ups.
Anji Microelectronics Technology (Shanghai) Co. was one of the stand-out performers, soaring more than 500 percent at one point before paring gains to end up 400 percent.
There will be no limits on price movements for the first five days of trading, after which a daily 20 percent band is imposed. China's main exchanges are subject to a 10 percent band to contain volatility.
- Oil up on Iran worries -
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Sydney, Seoul, Singapore, Manila and Jakarta were also lower, though Wellington and Taipei edged up.
In early trade, London was flat, while Frankfurt and Paris both dipped 0.1 percent.
There was some upbeat news for investors as China's Xinhua news agency said importers had started an arrangement to buy US agricultural goods, a week after President Donald Trump warned he could impose more tariffs if Beijing did not move quickly enough on the trade talks.
Trump and Xi Jinping agreed last month at the G20 to resume talks, with the Chinese leader promising to buy more farming goods from the United States.
"If we see China begin to follow through on their G20 sidelines promise, we could see the US follow up with some leniency on Huawei," said Edward Moya, senior market analyst at OANDA.
"Both sides don't want to admit, but they are politically motivated to wrap up this trade deal this year."
On oil markets, both main contracts rallied as tensions in the Gulf were raised by Iran's seizure of the UK-flagged tanker on Friday.
Brent climbed two percent and WTI was up 1.6 percent.
The news provided support against a weak global economic outlook and concerns about demand.
"Falling global demand and rising US stockpiles have helped turn oil charts very bearish, but that may not last as tensions remain high in the Persian Gulf," said Moya.
"If Iran keeps on seizing tankers in the Strait of Hormuz, the risks (of a)... military conflict will grow."
- Key figures around 0810 GMT -
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Tokyo - Nikkei 225: DOWN 0.2 percent at 21,416.79 (close)
Hong Kong - Hang Seng: DOWN 1.4 percent at 28,371.26 (close)
Shanghai - Composite: DOWN 1.3 percent at 2,886.97 (close)
London - FTSE 100: FLAT at 7509.38
Euro/dollar: UP at $1.1220 from $1.1216 at 2050 GMT
Pound/dollar: DOWN at $1.2485 from $1.2497
Dollar/yen: UP at 107.87 yen from 107.72 yen
West Texas Intermediate: UP 91 cents at $56.54 per barrel
Brent North Sea crude: UP $1.27 at $63.74 per barrel
New York - Dow: DOWN 0.3 percent at 27,154.20 (close)