Oil's relentless surge to a new peak above $124 weighed on Asian shares Friday, while a stronger yen pressured Japanese exporters, such as Toyota Motor.
The euro held onto its gains after bouncing back from a two-month low against the dollar on Thursday when the head of the European Central Bank dampened some expectations for rate cuts by signaling that fighting inflation was his top concern.
Crude oil's record breaking run had kept stocks on the back foot earlier this week as investors digested the prospect of what Goldman Sachs predicted could be a new spike to $200 a barrel.
U.S. light sweet crude was up 61 cents at $124.34 a barrel, having hit an intraday record of $124.61 in after-hours electronic trading late in the New York day. London Brent crude rose $1.47 to $123.79 a barrel, after settling 52 cents higher at $122.84.
Tokyo's Nikkei 225 Average fell 2.1 percent, marking its first weekly decline in eight weeks, dragged down by exporters such as Honda Motor and Canon on a stronger yen. Toyota Motor lost 3.3 percent after the world's biggest automaker forecast a larger-than-expected profit decline. The market extended its falls in the afternoon, after Takeda Pharmaceutical slid further after the company said it expects a sharp fall in annual income for this year.
South Korea's KOSPI shed over 1 percent, pressured by inflation concerns and disappointment over the central bank's decision the previous day to keep interest rates steady. Financial counters led the declines with Kookmin Bank and Shinhan Financial leading the declines.
Australia bucked the negative trend. The S&P/ASX 200 Index rose 0.85 percent to its highest level in over three months, as upbeat earnings at National Australia Bank lifted the financials, while resource firms rose on strong commodity prices.
Hong Kong stocks fell 1.5 percent on growing concerns over the outlook for China's economy after Vice Premier Wang Qishan said inflation was the country's biggest economic problem. Wang reaffirmed that the government would stick to a tight monetary policy to help cool an economy that has grown by double-digits for five years,
Wang's comments helped push the Shanghai Composite Index down 1.2 percent. China's consumer price inflation rose to 8.5 percent in April from 8.3 percent in March, two sources familiar with the data told Reuters late on Thursday. The data, which is subject to last-minute revisions, will be officially released on Monday. This raises the prospect of yet another interest rate hike by the central bank. Banks and property developers, which are most vulnerable to monetary tightening, led the decline. Industrial & Commercial Bank of China and Vanke, the largest listed developer, both slumped. Ping An Insurance jumped to a new high after it pledged publicly it would not proceed with its plan for a huge equity offer for at least six months.
Singapore's Straits Times Index ended 0.5 percent lower with banks such as United Overseas Bank continuing their decline from the previous session.