Hong Kong shares closed down 1.64 percent after Wall Street wilted overnight. Europe's main stock markets mainly fell as the price of crude soared above 135 dollars for the first time on Thursday.
"We're seeing a flight to defensives (such as utilities and pharmaceuticals) amid oil price, dollar and general economic concerns," said a saleswoman at a European brokerage who requested anonymity.
In Asia, Chinese share prices ended 1.65 percent in negative territory, Singapore shed 1.1 percent and South Korea lost 0.7 percent.
But Japanese shares recovered to close modestly higher, while Taiwan and Australia ended flat.
"If commodity prices continue to rise and oil prices stay high, it's difficult for Asian markets to make progress," Pierre Gave, the head of research at financial consultancy GaveKal told AFP.
"The big weight on Asian markets at the moment is the problem of inflation," said Hong Kong-based Gave. "We've seen a big outflow of capital from Asia over the last month and a half."
In Europe, Frankfurt's main index shed 0.51 percent, Paris slid 0.33 percent, while London gained 0.24 percent approaching the half-way stage.
"If it weren't for the miners and telecoms, I don't think we'd be seeing these slight gains" in London, said Mic Mills from tradindex.com.
Investors fear surging fuel and food costs will bleed cash from consumers' wallets and force some countries to hike interest rates in a bid to tame inflation by slowing economic growth.
They also worry about the wider impact of the ailing US economy, which is battling a slowdown after a house price downturn and default crisis among subprime -- or riskier -- mortgages.
On Wall Street the Dow Jones Industrial Average plummeted 1.77 percent Wednesday because of the feverish rise of black gold, with the US central bank cutting its 2008 economic growth forecast to 0.3-1.2 percent from 1.3-2.0 percent, citing oil prices as a factor.
Oil continued its astonishing rise Thursday, reaching a record-high 135.14 dollars a barrel in London after unexpected drops in US crude and gasoline stocks.
"The mood is so negative," said Prayoga Triyono, a fund manager at Henan Putirai in Jakarta. "(The) oil price does scare away investors although at some point it may boost interest in energy stocks."
The subprime crisis has meanwhile inflicted huge financial losses at a slew of international banks and led to a global credit crunch, with the US expected to drag world growth lower.
Oil's latest price surge comes as the US Federal Reserve slashed its 2008 growth forecast for the US economy, the world's biggest oil consumer .
The Fed on Wednesday cut its 2008 economic growth forecasts to a range of 0.3 to 1.2 percent, from its prior forecast of 1.3 to 2.0 percent in January. In foreign exchange trade, the dollar recovered against the euro and yen on Thursday after the Fed also signalled an end to its rate-cutting policy.
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