Still, oil dipped as Israel's expected ground offensive against Hamas in Gaza was delayed as diplomats tried to secure the release of more hostages, with some suggesting it could change Tel Aviv's strategy.
Uncertainty caused by the crisis -- sparked by Hamas's deadly October 7 attack -- has seen risk assets tumble with the Vix fear gauge hitting its highest level since March.
Israel warned Iran-backed Hezbollah risked dragging Lebanon into a conflict after reporting anti-tank missiles were fired again from the country Sunday.
The military said militants were "playing a very, very dangerous game" and "dragging Lebanon into a war that it will gain nothing from but stands to lose a lot".
While the fear remains that other countries including Iran could be drawn into a regional conflagration, the decision to hold off a ground attack, after weeks of bombing, has provided a shaft of light, pushing crude lower.
Oil is "taking a breather while the focus on humanitarian aid and securing hostage releases suggest that a potential ground invasion from Israel can wait", Yeap Jun Rong at IG Asia said.
"That may contain the risks of further escalation, at least for now."
Both main contracts were well down Monday.
Equity traders extended their US counterparts' selling, with Tokyo, Sydney, Seoul, Shanghai, Singapore, Taipei, Manila and Jakarta deep in the red.
Hong Kong was closed for a holiday.
The uncertainty was also keeping the dollar higher against its peers, and briefly broke 150 yen on bets the Federal Reserve will hold interest rates at their two-decade highs for some time as officials battle inflation.
The moves have revived talk of an intervention by Japanese authorities to support their currency.
However, observers said that while a report at the weekend said the Bank of Japan could tweak its ultra-loose monetary policy the yen would remain under pressure owing to the Fed's elevated borrowing costs.
The dollar's strength comes as 10-year Treasury yields, seen as a proxy for future rates, sit near 16-year highs.
"The main question dominating global financial markets, particularly for Asian capital markets, is whether the sell-off in US Treasuries will subside or persist," said Stephen Innes of SPI Asset Management.
"The trajectory of US Treasuries is not merely a question; it is the only question for financial markets," he added.
"US government bonds are the critical benchmark reference point against which virtually all other global assets are ultimately priced off."
Meanwhile, the Fed warned Friday in its half-yearly report on financial stability that geopolitical tensions -- particularly in the Middle East and Ukraine -- could push inflation back up and hurt the global economy.
"Escalation of these conflicts or a worsening in other geopolitical tensions could reduce economic activity and boost inflation worldwide," it said.
- Key figures around 0250 GMT -
Tokyo - Nikkei 225: DOWN 0.8 percent at 31,007.12 (break)
Shanghai - Composite: DOWN 1.0 percent at 2,952.28
Hong Kong - Hang Seng Index: Closed for holiday
Dollar/yen: UP at 149.88 yen from 149.84 yen on Friday
Euro/dollar: DOWN at $1.0582 from $1.0598
Pound/dollar: DOWN at $1.2155 from $1.2164
Euro/pound: DOWN at 87.04 pence from 87.17 pence
West Texas Intermediate: DOWN 1.0 percent at $87.22 per barrel
Brent North Sea crude: DOWN 0.9 percent at $91.38 per barrel
New York - Dow: DOWN 0.9 percent at 33,127.28 (close)
London - FTSE 100: DOWN 1.3 percent at 7,402.14 (close)
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