The gloom was seen overshadowing European bourses as well, with financial spreadbetters predicting Britain's FTSE 100 to open down around 0.2 percent, Germany's DAX off 0.3 percent, and France's CAC 40 to open 0.4 percent lower.
"The one factor in play at the moment is an escalation of Iraq concerns and how this is pushing energy prices higher," IG Market Strategist Stan Shamu said in a note to clients.
Sunni insurgents seized a mainly ethnic Turkmen city in northwestern Iraq on Sunday, while the United States boosted security for its diplomatic staff in Baghdad and said some personnel had evacuated from the embassy.
Brent rose about 0.6 percent to $113.16 per barrel, after touching $114.69 on Friday, its highest since September. Brent added more than $4 last week. U.S. crude climbed about 0.4 percent to $107.37, approaching Friday's nine-month high of $107.68.
The rising oil prices and shrinking risk appetite weighed on emerging Asian currencies, with the rupee hitting a five-week low and the rupiah and the South Korean won also withering.
Gold hit its highest in nearly three weeks as the Iraqi crisis supported the metal's safe-haven appeal, rising about 0.1 percent to $1,277.80 an ounce after hitting $1,278.74 earlier in the session - the highest since late May.
MSCI's broadest index of Asia-Pacific shares outside Japan was down for most of the session, moving away from a three-year high hit a week ago, but wavered in and out of positive territory in late afternoon trading.
China's Shanghai Composite Index added 0.7 percent. Some publicly listed Chinese banks qualified for a reduction in reserve requirements announced by the central bank last week, bankers told Reuters on Monday.
Japan's Nikkei stock average ended down 1.1 percent at a two-week low, dragged lower by fears of higher materials costs.
"Investors aren't expecting material costs will rise soon and have an immediate impact on companies' profits, but they are wary of these risks in the longer run," said Hikaru Sato, a senior technical analyst at Daiwa Securities. "The geopolitical concerns are lowering risk appetite."
Wall Street stocks edged higher on Friday, but ended the week with modest losses.
The dollar slipped about 0.3 percent to 101.76 yen, moving back toward a two-week low of 101.60 yen marked on Thursday. The euro shed 0.1 percent to buy 137.90 yen.
Against the greenback, the euro added about 0.1 percent on the day to $1.3551.
The dollar got little help from U.S. Treasury yields, which edged down as prices rose in response to waning risk appetite. The yield on benchmark 10-year Treasuries stood at 2.587 percent, down from Friday's U.S. close of 2.604 percent.
For further clues on the direction of U.S. rates, investors will be focusing on the U.S. Federal Reserve this week as it concludes its policy meeting on Wednesday. Markets will be watching for any signals on when the U.S. central bank might begin hiking interest rates.
"Key points are if Fed Chair (Janet) Yellen upgrades her view on the economic view in light of recent economic indicators and if the central bank raises its yield forecast, which would reignite expectations for earlier rate hikes," said Junichi Ishikawa, market strategist at IG Securities in Tokyo.
"Whether geopolitical risks have any currency impact depends on how the situation in Iraq and Ukraine impacts the equity markets, but so far their reaction appears limited," he said.
Other data in focus this week is China's latest report on foreign direct investment on Tuesday, and then house price figures on Wednesday. Investors would be concerned if the latter were to show a slowdown in property price growth, raising questions about the outlook for that sector especially given the broader weakness in the economy.
(Additional reporting by Ayai Tomisawa and Shinichi Saoshiro; Editing by Eric Meijer & Shri Navaratnam)
By Lisa Twaronite