A bank s electronic board shows the Hong Kong share index in Hong Kong, Thursday, Dec. 2, 2021. AP
The Omicron variant has been detected across the globe but no deaths have yet been reported, with authorities worldwide racing to determine how contagious it is and how effective existing vaccines are at fighting it.
Top US pandemic advisor Anthony Fauci said Sunday that while more information was needed, preliminary data on the severity of the Omicron variant are "a bit encouraging."
Nevertheless, the new strain has sparked fears that the global recovery could be put in jeopardy, as governments reimpose restrictions that many had hoped would be a thing of the past.
"Omicron-related uncertainty will linger while market participants wait to learn about the severity, infectiousness and resistance of the strain," Kim Mundy, a strategist at Commonwealth Bank of Australia, said in a note.
"Omicron could further push back the timeline on any travel-related and reopening rebound, and this continued 'stop-start' approach to reopening could result in weaker near-term growth," said Alexander Wolf, head of Asia investment strategy at JP Morgan Private Bank in Hong Kong.
"From a stock perspective, we'll likely see some near-term volatility given the amount of unknowns and the unclear impact on growth and policy."
Tracking virus fears -- as well as signs of a looming hawkish shift in US rates -- Tokyo closed lower. Seoul and Sydney were up.
Also down was Hong Kong, where news last week that Chinese ride-hailing giant Didi Chuxing would start the process of delisting from the New York Stock Exchange has sent shares in tech firms tumbling.
The move comes in the wake of a sweeping Chinese regulatory crackdown over the past year that has clipped the wings of major internet firms wielding huge influence on consumers' lives -- including Alibaba and Tencent.
Shares on the Hang Seng Tech index, which represents the 30 largest tech companies in the southern Chinese city, slumped by over three percent in afternoon trading on Monday.
Alibaba fell up to 8.3 percent in early trading, after the firm announced the biggest reshuffle of its top management since a massive fine for antitrust violations.
Also suffering blowback from the Didi delisting was Japanese conglomerate Softbank -- whose Vision Fund owns a substantial piece of the ride-hailing giant -- which lost nine percent Monday on the firm's woes and other regulatory bad news.
"A look at Alibaba Group, Didi Global and edutech companies highlights how little visibility there is on regulatory change in China," wrote Kirk Boodry of Redex Holdings on Smartkarma.
"On the aggregate, Vision Fund's public losses on China investments are $3.2 billion so far."
Piling on the woes in Hong Kong was continued uncertainty over the future of the Chinese property market, after developer Evergrande warned that in light of its current liquidity situation, there was "no guarantee that the Group will have sufficient funds to continue to perform its financial obligations".
In mainland China, Shanghai and Shenzhen both closed lower after a day of fluctuation.
Losses in the US also dragged markets down, after a week that saw the Federal Reserve signal a plan to accelerate the withdrawal of its monetary stimulus and potentially hike rates sooner.
Disappointing US jobs data on Friday contributed to the pessimism, showing the world's largest economy added just 210,000 jobs last month -- fewer than half the increase forecasters expected.