China's Shanghai Composite Index fell 2.8 percent, to a fresh 15-month closing low as concern over inflation and the market's ability to absorb large supplies of equity continued to deter buyers. The benchmark Shanghai Composite Index, hit by a late wave of selling in the final half-hour of trade, ending at 2,794.751 points, after hitting an intra-day low of 2,769.118. The index has dropped 19 percent so far this month, and is down 54 percent from last October's record high. (See video: China likely to be volatile in the short term).
Oil is currently trading below the $134 level in the Asian session.
Striking truckers and construction workers protesting against high fuel costs and low wages in South Korea weighed on the KOSPI, in a stark example of the human toll of soaring energy prices.
Seoul shares closed half a percent lower, with manufacturing and construction issues turning negative after a major labor group announced plans for a one-day strike in July. Shares in Hyundai Engineering & Construction and Daewoo Engineering & Construction both fell sharply.
Tokyo's Nikkei 225 Average ended almost flat, as investors locked in the previous day's sharp gains while they awaited U.S. economic data to gauge inflationary pressure. Throughout the day, the Tokyo market moved in a narrow range between positive and negative territory, as falls were kept in check by a rise in bank shares after the head of Lehman Brothers gave Wall Street some reassurance after the investment bank's first-ever quarterly loss.
Australian shares gained almost 1 percent as banks such as National Australia Bank and ANZ rose after the Reserve Bank of Australia's comments signaled interest rates on hold for some time, while miners were lifted by a rise in copper prices to a near three-week high. Investment firm Babcock & Brown continued its volatile run, climbing almost 13 percent after losing more than half its value the previous week.
Hong Kong shares ended slightly higher, as a mixed close on Wall Street and lackluster trading in regional markets kept trading volumes thin. Sinopec extended gains to rise 2.9 percent after oil prices eased further on Tuesday on hopes of higher output from Saudi Arabia. The stock also gained on speculation that China will raise domestic prices of finished petroleum products after the Beijing Olympics.
Singapore's Straits Times Index was ended half a percent lower with blue chip stocks falling across the board.
Sany Heavy Industry, which launched reforms to companies' state shareholding structures three years ago, became the first listed company whose entire share capital is freely tradable in the market, as a final lock-up period for some of its shares expired. All shares in 152 companies, or about one-tenth of Chinese listed firms, will be freely tradable by the end of this year, the official Securities Times reported.