Investors have long acknowledged the possibility of a Greek withdrawal from the 17-nation euro currency union as the country struggles to meet harsh austerity targets that are a condition of getting international bailout money.
But a financial news service's report, which quoted former Greek Prime Minister Lucas Papademos suggesting such a euro exit could be approaching, flustered markets.
"I think investors now are concerned that Greece may finally leave the euro currency union," said Dickie Wong of Kingston Securities Ltd. in Hong Kong.
Another big worry for investors is a slowdown in Chinese growth, compounded by a reluctance of Chinese companies to borrow because of uncertainty about the economy.
Japan's Nikkei 225 index fell 1.8 per cent to 8,575.55. The Bank of Japan on Wednesday left its key interest rate unchanged at near zero as widely expected.
Later Wednesday, leaders of the 27 European Union countries will meet in Brussels for a summit expected to focus on ways to kick start the region's faltering economy. A failure to make headway risks jolting markets further, analysts said.
"Unless there are dramatic developments at today's summit, risk assets are set to continue to remain under pressure," analysts at Credit Agricole CIB in Hong Kong said in an email.
Hong Kong's Hang Seng fell 1.7 per cent to 18,721.37 and South Korea's Kospi lost 1.3 per cent at 1,804.50. Australia's S&P/ASX 200 lost 1.1. per cent to 4,074.70.
Falling oil and metal prices hurt commodity shares. Hong Kong-listed PetroChina, China's largest oil and gas producer, fell 2.5 per cent. Aluminum Corp. of China lost 3 per cent.
Asian companies deriving significant sales revenue from exports slumped a day after the Organization for Economic Cooperation and Development warned that euro countries are at risk of falling into a "severe recession."
Hong Kong-listed China Shipping Container Lines Co. fell 4 per cent. Japan's Yamaha Motor Corp. tumbled 4.2 per cent and Panasonic Corp. lost 2.8 per cent. South Korea's Hyundai Motor Co. lost 1.7 per cent.
U.S. stocks traded higher Tuesday until near the close, when Dow Jones Newswires reported that Papademos said preparations for Greece to drop the euro are being considered.
A 50-point gain in the Dow Jones industrial average turned into a 57-point loss in 45 minutes. The Dow ended the day down marginally to 12,502.81. The Standard & Poor's 500 rose less than 1 point to 1,316.63. The Nasdaq composite index fell 0.3 per cent to 2,839.08.
Benchmark oil for July delivery was down 55 cents to $91.29 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell $1.01 to settle at $91.85 in New York on Tuesday.
In currencies, the euro fell to $1.2673 from $1.2756 late Tuesday in New York. The dollar fell to 79.61 yen from 79.92 yen.