Japan's benchmark Nikkei (.N225) fell 3.5% and nerves finally hit China, where blue chips (.CSI300) headed for their heaviest beating since U.S. tariffs whacked markets last year.
Selling has been even more furious in bonds and comes as traders count down to U.S. President Donald Trump's deadline for Iran to reopen the Strait of Hormuz, but are bracing for lasting economic damage, even if there is an unlikely breakthrough.
"Markets have been, until recently, extremely resilient," said Aaron Costello, head of Asia at an investment advisory Cambridge Associates, pointing to investors conditioned by years of Trump backflips to expect a short-term reversal.
"Then on Friday, markets kind of broke to new lows... because I think the reality is it is going to escalate before it de-escalates," he said at a Milken Institute event in Hong Kong.
"Right now, companies and countries have reserves and stockpiles, but those will eventually be depleted unless this wraps up. So markets are starting to price that and they need to price that."
MSCI's gauge of world stocks (.MIWD00000PUS) made a four-month low on Monday after breaking support at the 200-day moving average on Friday.
"There was a huge lack of conviction around valuation on this market rally. And so what we're seeing now is a fairly quick exit to the door," said Karen Jorritsma, head of Australian equities at RBC Capital Markets in Sydney.
"Cash balances are going up. We're seeing de-grossing across markets, here, in Asia, the United States, across the board. And I think that makes a lot of sense."
SET TO GET WORSE
The damage to energy infrastructure and the prospect of more destruction are starting to convince investors that neither a Trump policy pivot nor interest rate cuts will reverse the economic effects of the war.
Nearly a fifth of Qatar's LNG export capacity was knocked out by Iranian attacks and long-term contracts will be disrupted for years, the head of QatarEnergy told Reuters last week, while hardly any oil is traversing the Strait of Hormuz.
Airline ticket prices have jumped. Petrol prices are up and businesses are responding. United Airlines (UAL.O), for example, said it was preparing for oil at $100 until the end of 2027 and planned capacity cuts of five percentage points.
In Asia, where dependence on Middle East oil makes economies especially vulnerable, money is switching sectors in stock markets and in some cases, leaving outright.
Net selling of $44.36 billion worth of stocks in the region this month is on pace for the biggest monthly outflow since at least 2008.
"This (escalation) is causing investors to realise that we're really not at the end of this whole thing. In fact it looks like it's going to get worse," said Francis Tan, chief Asia strategist at Indosuez Wealth Management in Singapore.
"(Clients) are staying more defensive, taking some profits off the table, locking some of the profits that they have been seeing for the last one year-plus."
CASH THE ONLY PLACE TO HIDE
There are few shelters. Inflation risks are driving down bond prices while gold, a traditional safe haven, has been falling as investors clear profits from its recent rally.
Gold mining shares were hammered in Australia on Monday as the price of carting diesel to remote mine sites started to rocket.
To be sure, longer-term investors with return horizons counted in years are not panicking or upending portfolios.
"We haven't seen massive flows out of equities," Lori Heinel, global chief investment officer at State Street Investment Management, said at a media briefing in Hong Kong on Friday.
"But the longer the conflict goes on, the more vulnerability Asia will have, because of the dependence on energy and the potential for elevated levels of energy prices."
Energy - oil, gas and renewables - has been a popular buy, as has the dollar, on a view that U.S. shares may be best placed to ride out the shock.
Lombard Odier recently upgraded its U.S. equities view to neutral on the basis that the country is an energy exporter, although even that market has started to wobble.
"Whether it's stocks, bonds, or gold, they're all falling," said Jason Chan, strategist at Bank of East Asia.
"No particular asset is immune ... so in the short term, cash seems to be the only place to hide."
Reporting by Ankur Banerjee, Rae Wee and Gregor Stuart Hunter in Singapore, Jiaxing Li in Hong Kong and Gaurav Dogra in Bengaluru; Editing by Clarence Fernandez
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