A woman wearing a protective mask, amid the COVID-19 outbreak, walks past an electronic board displaying Japan and other countries' stock indexes outside a brokerage in Tokyo, Japan, September 21, 2021.
A woman wearing a protective mask, amid the COVID-19 outbreak, walks past an electronic board displaying Japan and other countries' stock indexes outside a brokerage in Tokyo, Japan, September 21, 2021. Reuters / KIM KYUNG-HOON

Asian shares tumbled to their lowest in nearly two years on Tuesday as investors shed riskier assets on worries about higher interest rates and their impact on economic growth, while the dollar held near 20-year highs.

MSCI's broadest index of Asia-Pacific shares outside Japan was down 0.8%, falling for a seventh straight session and extending declines to 17% so far this year.

Across Asia, share indexes were a sea of red. The Nikkei lost 0.9%, Australian shares shed 2.5% and Korean stocks lost 2%.

S&P 500 stock futures and Dow Jones futures both fell 0.5% and Nasdaq futures were down 0.6%.

"The idea of a benign and gentle tightening cycle has evaporated," ANZ analysts said in a report.

"The reality is that the Fed cannot control the supply side of the economy in the short-run, so as long as key indicators like the labour force participation rate stay low and Chinese exports slow, the risk to inflation, and therefore interest rates, lies to the upside," ANZ said.

Central banks in the United States, Britain and Australia raised interest rates last week and investors girded for more tightening as policymakers fight soaring inflation.

Overnight, U.S. stocks extended Friday's bruising sell-off as investors rushed to protect themselves against the prospect of a weakening economy. [.N]

Oil prices ticked lower on Tuesday on demand worries as coronavirus lockdowns in China, the top oil importer, continued. Brent crude slipped 0.5% to $105.4 a barrel after falling 5.7% on Monday.