Asian stocks were mixed on Tuesday with risk appetite dealt a triple blow over developments in Iraq, Ukraine and Argentina.
Militants from the Islamic State of Iraq and the Levant (ISIL) took control of another town on Monday, Saqlaqiya, west of Baghdad, with the help of allied Sunni tribesmen. Government army officials also reported fighting south of the capital city. The U.S. is reportedly considering air strikes to support the Iraqi army forces, but has ruled out any coordinated military action with Iran.
Read MoreHow ISIS terror group amassed $2B in assets
Meanwhile, Russia cut off gas supplies to Ukraine on Monday after the two countries failed to agree on a payment scheme, according to Ukraine's energy minister.
Concerns about Argentina also weighed on sentiment. The U.S. Supreme Court on Monday said it would not consider an appeal against paying holdout creditors. That means Argentina now faces a possible default if it doesn't repay $1.3 billion to creditors by June 30th.
Gains on Wall Street
U.S. stocks managed to reverse losses overnight, ending mildly higher for a second session on upbeat economic reports. May industrial production increased a monthly 0.6 percent, home builder sentiment surged in June and the New York Federal Reserve's Empire State index of business conditions in June rose to a four-year high.
Nikkei 0.3% higher
Japanese shares rebounded after hitting a two-week low on Monday as investors welcomed the the government's blueprint for economic reform, dubbed the "third arrow" of Prime Minister Abe's growth strategy, released on Monday.
Read MoreAbe's third arrow just what Japan stocks need
Itochu jumped 2.6 percent after the Nikkei newspaper said the trading company was targeting a return of equity of 15 percent.
Real-estate firm Mitsui Fudosan rallied 4.7 percent following strong demand for its first share sale in three decades to raise capital.
China shares lower
Shanghai stocks shed 1 percent after ending at their highest levels since April 21 on Monday. Data out on Tuesday showing that foreign direct investment fell to a 16-month low in May weighed on sentiment.
Industrial Bank fell 1.5 percent while China Merchants Bank and China Minsheng Banking eased 0.7 percent each despite saying they were eligible for reserve ratio cuts under the central bank's plan to increase lending to small business and the rural sector.
Hong Kong's Hang Seng Index dipped 0.5 percent, down for a second straight session.
ASX dips 0.2%
Australia's benchmark ended at its lowest level since April 16 in quiet trade following the release of minutes from the Reserve Bank of Australia's (RBA) June policy meeting. The central bank repeated its accommodative stance of lower interest rates and warned of subpar economic growth ahead.
The Australian dollar weakened 0.5 percent against the greenback to a one-week low.
Iron ore prices hit their lowest level since 2012 at $89 a ton, which weighed on miners. Fortescue Metals dropped 3 percent while Rio Tinto shed 1 percent.
Kospi gains 0.4%
South Korean shares extended gains into a second session thanks to gains in LG affiliates. LG Display jumped 3 percent while LG Electronics added over 1 percent.
Read MoreMeet South Korea's millionaire tutors
Hyundai Merchant Marine lost 1.6 percent after saying that it will raise 114 billion Korean won through a new share issue.
Sensex rallies 1.3%
Indian stocks finished higher while the fell to a near two-month low after finance minister Arun Jaitley said that the government was committed to fighting inflation. Data on Monday showed wholesale inflation rising to a five-month high in May.