The bloodshed's impact on markets was felt most in Seoul, where the Kospi tanked more than 12 percent as investors unwound their tech positions built up in recent months on the back of the AI boom.
The selling came as oil prices rallied more than two percent on the fifth day of attacks on the Islamic republic, with observers warning that the choking of supplies from the Middle East could fan inflation and shatter hopes for more interest rate cuts.
US President Donald Trump pledged that if needed, the navy would escort oil tankers through the Hormuz Strait -- through which about a fifth of global oil supplies flow -- and ordered Washington to provide insurance for shipping.
On Wednesday Iran's Revolutionary Guards said the route was "under the complete control of the Islamic Republic's Navy".
Iranian strikes on several neighbours threatened to broaden the conflict, while uncertainty about how long the war would take added to upward pressure on crude prices, with both main contracts climbing around three percent Wednesday.
Both main contracts have soared around 15 percent since Friday, before the attacks began. Brent hit a high above $85 Tuesday and West Texas Intermediate topped out near $88. Some analysts warn they could soon hit $100.
Seoul's Kospi, which had rattled to multiple record highs since the start of the year on the back of the AI tech boom, was sent reeling.
Trading on the index and Kosdaq was halted after they both sank more than eight percent, and when business resumed they extended losses.
The Kospi crashed more than 12 percent -- after shedding more than seven percent Tuesday -- as panic-selling set in.
That left the index suffering its worst two-day collapse since 2008 during the global financial crisis. It has also more than halved the near 50 percent gains enjoyed between the start of the year and Friday. It rose 76 percent last year.
Chip giants Samsung and SK hynix, which have led Seoul's surge this year, dived 11.7 percent and 9.6 percent respectively.
- Headache for central banks -
"Asian equities are now staring at a third consecutive day of losses and the reason is not mysterious," wrote Stephen Innes at SPI Asset Management.
"When crude edges higher, the invoice lands hardest in Asia, where imported energy is not just a line item but a structural dependency.
"Export-driven economies suddenly find themselves recalculating margins with a more expensive barrel sitting quietly in the background of every factory floor and shipping lane."
Chung Hae-chang, analyst at Daishin Securities, added: "Because South Korea, Japan, China and Taiwan rely heavily on energy shipments that pass through the Strait, any blockage would have significant negative effects on the market."
Japan's Nikkei 225 ended off more than three percent, with chipmakers Advantest and Tokyo Electron losing more than four percent.
Elsewhere in Asia, Taipei sank more than four percent. Bangkok tumbled eight percent to also spark a brief trading halt.
Hong Kong, Sydney, Singapore, Shanghai, Wellington, Mumbai, Manila and Jakarta were also deep in negative territory.
The selling followed big losses in Europe, where London fell 2.8 percent but both Frankfurt and Paris dropped by more than three percent -- hit by a spike in natural gas prices to their highest levels since Russia's invasion of Ukraine.
However, all three opened slightly higher Wednesday.
The prospect of energy costs spiking has hammered hopes for any more central bank interest rate cuts as officials were already concerned about still-elevated inflation.
Analysts said the Federal Reserve, European Central Bank and Asian central banks would likely delay interest rate cuts but the Bank of England as well those in parts of Latin America and Central Europe could be forced to hike.
The dollar extended its recent gains fuelled by bets on fewer -- and possibly no -- rate cuts as well as its safe haven status.
- Key figures at around 0815 GMT -
Seoul - Kospi: DOWN 12.1 percent at 5,093.54 (close)
Tokyo - Nikkei 225: DOWN 3.6 percent at 54,245.54 (close)
Hong Kong - Hang Seng Index: DOWN 2.0 percent at 25,249.48 (close)
Shanghai - Composite: DOWN 1.0 percent at 4,082.47 (close)
London - FTSE 100: UP 0.1 percent at 10,496.10
West Texas Intermediate: UP 2.5 percent at $76.43 per barrel
Brent North Sea Crude: UP 2.8 percent at $83.69 per barrel
Euro/dollar: DOWN at $1.1608 from $1.1617 on Tuesday
Pound/dollar: DOWN at $1.3353 from $1.3358
Dollar/yen: DOWN at 157.40 yen from 157.59 yen
Euro/pound: UP at 87.00 pence from 86.98 pence
New York - Dow: DOWN 0.8 percent at 48,501.27 (close)
dan/mjw
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