Oil breached 70 dollars a barrel in Asian trading Monday, sending the region's major stock markets spiraling down.
Investors in Asia Monday dumped shares in oil-sensitive companies such as airlines, shipping companies and car makers.
Jakarta's composite index fell more than five percent, while South Korea's KOSPI lost two-point-15 percent. Japan's Nikkei and Hong Kong's Hang Seng both dropped one percent.
Castor Pang, a strategist at Sun Hung Kai Securities in Hong Kong, says investors were worried that record oil prices will hurt economies and corporate profit. Almost all of Asia depends on imported oil.
"The oil price has come up to 71 dollars per barrel in Asia, so the market dropped quite a lot."
Oil traded above 70 dollar a barrel in Asia Monday because of fears of a supply crunch as a powerful hurricane lashed oil-production areas in the Gulf of Mexico.
Several Asian companies already are reeling from rising fuel costs. Many regional airlines are seeing profits slump because of high fuel costs.
On Monday, Philippine officials warned the country might not meet its economic growth target of five-point-three percent because of high oil prices and drought.
Soaring oil costs could lead to inflation, restrict consumer demand and slow growth in gross domestic product in many countries.
However, Song Sen Wun, an economist at CIMB-GK Goh Securities in Singapore, says consumer demand remains strong in much of the region. And that, he says, is helping growth remain steady for some economies.
"Companies are essentially taking it on the chin and hence margins have been affected, whereas consumers have not quite faced the full cost of high price of energy yet. So consequently that, plus strong underlying economic activities from China all the way down to even Indonesia, continues to support GDP (gross domestic product) growth. Unless we see confidence get shaken, possibly if oil prices continues to climb to and beyond 80 dollars a barrel, this current spike is seen as temporary."
But record oil prices are putting pressure on countries such as Indonesia and China to cut government subsidies on oil products.
Indonesia's weakening currency is making it more expensive for the country to buy oil.
In recent weeks, southern China experienced fuel rationing because state-owned oil refiners balked at supplying gasoline at low government-fixed prices.
But economists and political analysts say some governments are afraid to risk political unrest by cutting those subsidies.