MSCI's broadest index of Asia-Pacific shares outside Japan sagged about 0.1 percent.

Nikkei was up by 0.2 percent in early afternoon trading, after initially falling as much as 0.7 percent on cautious bargain-hunting by investors, who were hopeful that the conflict will be avoided.

"Investors seem to think that Russia will take Crimea and the West will impose sanctions on Moscow, but there will likely be no military clash," said Kyoya Okazawa, the head of global equity and commodity derivatives at BNP Paribas in Tokyo.

Still, many investors flocked to safe assets for fear of further escalation in tensions. Gold stood near a four-month high while the yield on US Treasuries dropped to a one-month low, reflecting higher prices for the bonds.

Russia's Black Sea fleet denied reports it had given Ukrainian forces in Crimea an ultimatum to surrender by early on Tuesday or face attack, Interfax news agency said. But Ukraine's acting President said Russia's military presence in Crimea was growing.

President Barack Obama earlier on Monday said that Russia violated international law with its military intervention in Ukraine and warned that US government would look at a series of economic and diplomatic sanctions to isolate Moscow.

The European Union also threatened unspecified "targeted measures" unless Russia returns its forces to their bases and opens talks with Ukraine's new government.

Fear of a military confrontation pummelled Russian financial markets, with the rouble-denominated MICEX stock index diving 10.8 percent.

The rouble fell two percent against the dollar to a record low of 36.50 to the dollar even as the Russian central bank raised interest rates to stem capital flight and to defend the currency.

"The latest situation could look like a new Cold War. Lack of clear, strong leadership in the world could lead to a more fragmented world, destabilizing the global economy. More funds will flow to safe assets for the time being," said Daisuke Uno, chief strategist at Sumitomo Mitsui Bank.

On Wall Street, the S&P 500 index lost 0.7 percent, to 1,845.73 as concerns over Ukraine overwhelmed generally upbeat economic data on US economy.

Financial data firm Markit's gauge of US factory activity rose in February to its highest level since May 2010.

Separately, the Institute for Supply Management said its index of US factory activity rose to 53.2 in February, topping expectations. Personal spending in January grew despite the harsh winter weather.

The data helped to underpin the dollar, with the dollar index rebounding from a two-month low hit on Friday to stand at 80.132, up about 0.1 percent on the day, and moving away from Friday's low of 79.688. The euro stood at USD 1.3727, down slightly on the day and off Friday's peak of USD 1.38255.

Investors' risk averse mood helped the yen, which stood near a one-month high against US dollar. The yen fetched 101.61 yen to the dollar, not far from the month high of 101.20 hit on Monday.

The Australian dollar erased initial gains after the Reserve Bank of Australia kept rates steady at a record low as widely expected. The Aussie eased about 0.2 percent to USD 0.8926, not far from a one-month low of USD 0.8891 touched on Monday. It briefly rose to a session high of USD 0.8970.

Gold, another traditional safe-haven asset, was steady at USD 1,349.96 per ounce, just below Monday's four-month high of USD 1,354.80, bolstered by the risk-averse mood.

Gains in US Treasuries sent the benchmark 10-year yield to a one-month low of 2.592 percent as prices rose. The yield was last at 2.611 percent in Asia, compared with its US close of 2.608 percent.

Fear of possible armed conflict boosted oil prices. US crude futures, which have been rising for weeks due to cold winter in many parts of United States, stood near a five-month high hit on Monday. They were last at USD 104.68 per barrel, down about 0.2 percent on the day but still not far from Monday's high of USD 105.22.

Three-month copper on the London Metal Exchange was nearly flat on the day at USD 6,968.75 a tonne, after it skidded to a three-month low of USD 6,944 a tonne in the previous session.

(Agencies)

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