Worries over Dubai's debt problems have driven Asian share prices down sharply.
The move by state-owned Dubai World to delay paying some of its debt shook the markets in Europe on Thursday and those nerves spilled over into Asia.
Tokyo's benchmark Nikkei fell 3.2% to 9,081.52, its lowest level since July. In Hong Kong, the Hang Seng was down 4.9% at 21,239.5.
Oil prices also fell. US crude dropped 4.5% to $74.51 a barrel and London Brent Crude was down $1.26 to $75.73.
The biggest underlying fear is that Dubai's problems could reignite the financial turmoil of the credit crisis. That would lower global demand for a whole range of commodities, including oil.
The Gulf state, which has less oil money than many of its neighbours, became a trading and tourism hub with global ambitions.
It said on Wednesday it would ask creditors of the state-owned Dubai World and Nakheel to agree to a standstill on billions of dollars of debt as a first step towards restructuring.
Dubai World, the conglomerate that led the emirate's expansion, had $59bn (£36bn) of liabilities as of August, a large proportion of Dubai's total debt of $80bn. Nakheel was the builder of three palm shaped islands off Dubai.
The news shook markets that are recovering from the collapse of the US housing market and contagion that threatened to rupture the global financial system last year.
"The panic button's been hit again," said Francis Lun, general manager of Fulbright Securities.
Banks and builders were hit hardest as they are the most likely to be exposed to firms with property at the sharp end of the slump.