SHANGHAI - Asian markets extended last week's sell-off Monday on fears of a regional conflict in the Middle East and worries that US interest rates will remain elevated for longer than initially thought.
Still, oil dipped as Israel's expected ground offensive against Hamas in Gaza was delayed, with diplomats trying to secure the release of more hostages and some suggesting this could change Tel Aviv's strategy.
Uncertainty caused by the crisis -- sparked by Hamas's deadly October 7 attack, followed by weeks of Israeli bombardment of Gaza -- 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 the conflict after reporting anti-tank missiles were fired again from the country Sunday.
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 (is) 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 down at least one percent Monday.
Equity traders extended their US counterparts' selling, with Tokyo, Sydney, Seoul, Shanghai, Singapore, Taipei, Mumbai, Manila and Jakarta deep in the red.
Hong Kong was closed for a holiday.
London sank at the open, while Paris and Frankfurt edged higher.