Oil prices extended recent sharp losses, trading below $84 a barrel on expectations that weaker global growth will crimp demand for crude. The dollar was lower against the yen and the euro.
Among the major Asian markets, Hong Kong's Hang Seng tumbled 4 percent to 20,100.20 and South Korea's Kospi crumpled 6.7 percent to 1,814.100. Japan's Nikkei 225 stock average dropped 2.5 percent to 9,067.88.
Futures pointed to losses on Wall Street when it opens Monday. Dow futures were off 258 points, or 2.3 percent, at 11,144 and broader S&P 500 futures shed 28.8 points, or 2.4 percent, to 1,169.00.
"It's not Armaggedon, but it feels like it," said Hong Kong-based analyst Francis Lun, adding that he foresees the territory's Hang Seng index to sink below 19,000 - a decline of a further 5 percent - before making any kind of comeback.
Banking shares were tainted by fears the sector could face heavy losses as the sovereign debt crisis in Europe continued to brew. Industrial and Commercial Bank of China, the world's biggest bank by market value, fell 4.1 percent. Port operators - whose lifeblood of imports and exports would be at risk if the global economy goes bust - were stung badly. Hong Kong-listed China Shipping Container Lines Co. dropped 10.2 percent.
Meanwhile, a strengthening yen, which makes Japanese products more expensive when they are sent overseas, slammed the country's powerhouse export sector. Hitachi Corp. dropped 2.6 percent. Sony was 2.8 percent down. Mazda Motor Corp. lost 3.1 percent.
Standard & Poor's downgrade of the U.S. sovereign credit rating to AA+ from the top-notch AAA, announced late Friday, was yet another blow to confidence in the struggling U.S. economy. It adds to growing fears that the world's No. 1 economy may be headed back into recession.
Those anxieties have been compounded by signs that Europe's government debt crisis is threatening to engulf bigger economies such as Italy and Spain.
David Cohen of Action Economics in Singapore said the downgrade Friday did not come as a surprise, given the warnings issued by the agency weeks in advance - but that it may serve as a wake-up call for leaders to take action.
"As long as people can calm down quickly enough, it need not become another global financial crisis," Cohen said.
Elsewhere in Asia, Australia's S&P/ASX 200 index dropped 2.7 percent to 3,996.10. Singapore's benchmark dived 4.3 percent, Taiwan's market slid 5 percent and China's Shanghai Composite shed 3.7 percent.
"I think it's still a matter of people being cautious given they don't really know how wildly these overseas markets will respond," Westpac Banking Corp. chief economist Bill Evans told Australian Broadcasting Corp. television.
"I would expect people will take the risk off the table at the moment waiting for some more clarity in those two big issues: how will the U.S. respond to the downgrade and will the Europeans settle down these concerns in Europe?" he said.
Seeking to avert panic spreading across financial markets, finance officials from the Group of Seven industrial countries issued a joint statement late Sunday saying they were committed to taking all necessary measures to support financial stability and growth.
The European Central Bank, meanwhile, said it will "actively implement" a bond-purchase program that could boost Spanish and Italian bonds and drive down interest yields that threaten those countries with financial disaster.
The burst of activity underscored how government debt levels in Europe and the U.S. have unsettled financial markets - and sharpened fears that debt troubles could derail the global recovery from the 2007-2009 financial crisis.
The Dow fell 5.8 percent last week amid dour U.S. economic news. It plunged 513 points on Thursday alone, the worst day for the Dow since the global financial crisis erupted in 2008.
Benchmark oil for September delivery was down $3.27 to $83.60 a barrel in electronic trading on the New York Mercantile Exchange. Crude rose 25 cents to settle at $86.88 on Friday.
In London, Brent crude was down $2.85 at $106.52 per barrel on the ICE Futures exchange.
In currencies, the dollar weakened to 78.01 yen from 78.34 yen late Friday in New York. The euro rose to $1.4310 from $1.4265.