Shares in South Korea plummeted, while the Korean won also slipped, after the White House announced that the ongoing Vietnam summit between U.S. President Donald Trump and North Korean leader Kim Jong Un on Thursday had been cut short with no agreement reached.
The Kospi in South Korea dropped 1.76 percent to close at 2,195.44 while the Kosdaq tumbled 2.78 percent to finish its trading day at 731.25. Shares of industry heavyweight Samsung Electronics and chipmaker SK Hynix fell 3.53 percent and 5.02 percent, respectively. Shares of companies with potential exposure to North Korea were also hammered, with Hyundai Elevator diving 18.55 percent.
The Korean won slipped 0.42 percent to about 1,121.90 against the dollar after seeing an earlier high of 1,115.80, as of 3.05 p.m. HK/SIN.
Elsewhere in Asia, mainland Chinese stocks were mixed on the day, with the Shanghai composite declining 0.44 percent to close at 2,940.95, while the Shenzhen component advanced 0.290 percent to finish its trading day at 9,031.93. The Shenzhen composite rose 0.351 percent to close at 1,546.33.
Hong Kong's Hang Seng index was down more than 0.4 percent in its final hour of trading.
China's factory activity declined for the third consecutive month in February. The official Purchasing Manager's Index slipped to 49.2 in February, data showed on Thursday — its weakest since February 2016. The 50-point index mark separates expansion from contraction on a monthly basis.
Japan's Nikkei 225 and Topix both declined 0.79 percent to 21,385.16 and 1,607.66, respectively. Australia's recovered from earlier losses to end its trading day higher by 0.3 percent at 6,169.00.
Overnight on Wall Street, stocks stateside touched their lows in the Wednesday session as U.S. Trade Representative Robert Lighthizer hinted that a trade deal was not yet certain, saying that any agreement would need to be more than just purchases by China.
"It's not clear yet that (Trump's) got a win on that China trade deal," Richard Martin, managing director at IMA Asia, told CNBC's "Squawk Box" on Thursday, adding that the U.S. president was the "only one actually who's saying he's got a win" in his tweets.
"We've yet to see what the Chinese are gonna say and no one has a clue what are in the documents that are being put together," Martin said.
Trade tensions between the U.S. and China eased this week after Trump pushed back a closely-watched deadline on adding additional tariffs on Chinese goods.
"India-Pakistan relationships took a precarious turn yesterday over border skirmishes involving both countries' army and air forces. Questions arise over whether such instances can leave lasting impact on markets," said DBS Group Research in a note. "Developments are fluid and uncertain at this junction."
Past instances, however, have showed that the majority of such tensions between the two countries had a "short-lived and localised" impact, they said.
The U.S. dollar index, which tracks the greenback against a basket of its peers, was at 96.136 after touching lows below 95.9 yesterday.
The Japanese yen, often viewed as a safe-haven currency, traded at 110.78 against the dollar after seeing an earlier low of 111.00. The Australian dollar changed hands at $0.7129 after touching an earlier high of $0.7166.
Oil prices traded lower in the afternoon of Asian trading hours. The international benchmark Brent crude futures contract slipped 0.59 percent to $66.00 per barrel. U.S. crude futures were lower by 0.35 percent at $56.74 per barrel.
— Reuters, along with CNBC's Fred Imbert and Everett Rosenfeld, contributed to this report.