After a week-long bombing campaign, Israel has amassed a huge army on the border with Gaza for what is expected to be a ground incursion aimed at flushing out militants after surprise attacks on October 7 that left hundreds dead.
Tel Aviv has ordered more than a million Palestinians to evacuate the north of the territory, fuelling worries about a humanitarian crisis.
While President Joe Biden has said Israel had the right to defend itself, he told CBS news program 60 Minutes that any move to occupy the Gaza Strip again would be a "big mistake".
However, reports said he was considering a trip to Israel after being invited in a phone call with Israeli Prime Minister Benjamin Netanyahu, while Secretary of State Antony Blinken is set to return Monday for the second visit since the Hamas attacks.
The possible meeting comes amid fears that the local conflict will turn regional if Iran -- which has been accused of helping stage this month's attack -- becomes involved.
"The key uncertainty is whether a ground operation risks widening the conflict, with markets focused on whether Iran and its allies are drawn into the conflict," said National Australia Bank's Tapas Strickland.
Meanwhile, JPMorgan Chase & Co boss Jamie Dimon warned Friday of the geopolitical crisis if the fighting widened.
"This may be the most dangerous time the world has seen in decades," he said in the bank's third-quarter earnings statement.
"The war in Ukraine compounded by last week's attacks on Israel may have far-reaching impacts on energy and food markets, global trade, and geopolitical relationships."
The uncertainty weighed on Wall Street stocks, with the Nasdaq and S&P 500 both dropping, while oil prices soared almost six percent.
However, the Dow ended slightly higher thanks to strong earnings from JPMorgan, Citi and Wells Fargo that came on the back of elevated interest rates.
Asia was in the red, with Tokyo, Hong Kong, Shanghai, Singapore, Seoul, Taipei, Wellington and Manila all down.
Oil prices, however, dipped on profit-taking.
Adding to the dour mood was news that the White House will tighten rules on Chinese access to chips and chip-making equipment, maintaining a long-running security standoff between the superpowers, despite moves to ease tensions.
Traders will be keeping a close eye on speeches this week by several Federal Reserve decision-makers including boss Jerome Powell, hoping for some idea about their plans for rates.
The talks come after a number of officials in recent weeks indicated they were happy to keep borrowing costs on hold, soothing concerns about more tightening that some observers fear could flip the US economy into recession.
- Key figures around 0230 GMT -
Tokyo - Nikkei 225: DOWN 1.6 percent at 31,786.78 (break)
Hong Kong - Hang Seng Index: DOWN 0.2 percent at 17,777.03
Shanghai - Composite: DOWN 0.4 percent at 3,075.99
Dollar/yen: DOWN at 149.46 yen from 149.53 yen on Friday
Euro/dollar: UP at $1.0525 from $1.0513
Pound/dollar: UP at $1.2159 from $1.2138
Euro/pound: DOWN at 86.56 pence from 86.58 pence
West Texas Intermediate: DOWN 0.2 percent at $87.56 per barrel
Brent North Sea crude: DOWN 0.1 percent at $90.84 per barrel
New York - Dow: UP 0.1 percent at 33,670.29 (close)
London - FTSE 100: DOWN 0.6 at 7,599.60 (close)
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