Hong Kong's share index plunged 5.4 per cent on Monday after the Chinese government ordered a lockdown to combat an outbreak of coronavirus in the neighbouring city of Shenzhen.
The shutdown in the manufacturing and technology hub of 17.5 million people comes amid mainland China's biggest COVID-19 outbreak in two years.
Chinese shares have also come under selling pressure due to the threat of de-listings of major Chinese companies on US stock exchanges. A report in the state-run newspaper Economic Daily said regulators were negotiating to resolve a dispute over auditing rules.
The Securities and Exchange Commission required that US-listed foreign stocks disclose their ownership structures and audit reports. It comes at the heels of technology-related sanctions against some companies.
Wang Sheng, head of the investment banking division at China International Capital Corp, said in an opinion piece that China and the US should be able to strike a deal.
Shares were mixed elsewhere in Asia, while oil prices slipped about $4 per barrel on Monday as the coronavirus outbreaks in China have added to worries over supply chain disruptions, uncertainty over the war in Ukraine and persistently high inflation kept investors guessing about what lies ahead.
Tokyo and Sydney advanced while Hong Kong, Seoul and Shanghai declined. The US futures were higher.
With the Federal Reserve due to hold a policy meeting this week, "Markets are bracing for two diametrically opposed forces, which will obfuscate the picture,'' Mizuho Bank said in a commentary.
"One is geo-political uncertainty that may leash fresh convulsions of risk off' and the other, a hawkish Fed that is poised to hike'' interest rates by at least 0.25 percentage points.
Ukrainian President Volodymyr Zelenskyy vowed to keep negotiating with Russia as Russian forces bombarded a military training base near the Polish border. The bombing killed nine people and injured dozens others.
Talks aimed at reaching a cease-fire failed again on Saturday, Russia's widening of its offensive to the western part of Ukraine comes amid warnings over the widening impact from the conflict.
Moody's Investor Service said it was reviewing its credit ratings for both countries in view of rising security, economic and financial risks.
Hong Kong's Hang Seng index lost 3.8 per cent to 19,763.69 and the Shanghai Composite index slipped 1.9 per cent to 3,247.48.
Tokyo's Nikkei 225 index rose 0.6 per cent to 25,307.85 and the S&P/ASX 200 in Australia gained 1.2 per cent to 7,149.40. South Korea's Kospi lost 0.6 per cent to 2,644.99.
On Friday, the S&P 500 fell 1.3 per cent to 4,204.31. The Dow Jones Industrial Average lost 0.7 per cent to 32,944.19, while the Nasdaq composite index gave up 2.2 per cent to 12,843.81. The Russell 2000 index of smaller companies slipped 1.6 per cent to 1,979.67.
World markets have been rocked by dramatic reversals as investors struggle to guess how Russia's invasion of Ukraine will affect prices of oil, wheat and other commodities produced in the region.
That's raising the risk the US economy may struggle under a toxic combination of persistently high inflation and stagnating growth. The Federal Reserve is expected to raise interest rates at its meeting this week as it and other central banks act to stamp out the highest inflation in generations, while trying to avoid causing a recession by raising rates too high or too quickly.
Amid all the uncertainty, US stocks remain about 10 per cent below their peak from earlier this year, while crude oil prices remain more than 40 per cent higher for 2022 so far.
US benchmark crude oil lost $2.73 to $106.62 per barrel in electronic trading on the New York Mercantile Exchange. It surged $3.31 per barrel on Friday to $109.33 per barrel.
Brent crude oil, the standard for international pricing, declined $2.48 to $110.19 per barrel.
The US dollar rose to 117.78 Japanese yen from 117.35 yen. The euro weakened to $1.0915 from $1.0926.
(With inputs from PTI)