White House pressure on other countries to stop all imports of Iranian oil is seen as creating an oil a shortage while a power struggle in Libya has left it unclear whether the internationally recognised government or rebels will handle oil exports.
OIL: Benchmark U.S. crude gained 21 cents to $70.74 per barrel in electronic trading on the New York Mercantile Exchange.
A Cabinet report repeated promises to cut tariffs and open more industries to investment.
"Such legislation will provide additional tools to combat the predatory investment practices that threaten our critical technology leadership, national security, and future economic prosperity", Trump said in a statement. Hong Kong's Hang Seng tumbled 1.8 percent to 28,356.26.
After an initial rally, the S&P technology.SPLRCT and industrial.SPLRCI sectors - which have a relatively high revenue exposure to China - fizzled.
"The market volatility in China is being driven by a combination of factors Sino-US trade tensions, concerns over corporate bond defaults in China and uncertainties to the growth outlook", Tai Hui, J.P. Morgan Asset Management's chief market strategist for Asia-Pacific said in a note.
"Nothing today came out other than commentary from the administration", said Michael Antonelli, managing director, institutional sales trading at Robert W. Baird in Milwaukee. The dollar edged higher, its index against a basket of currencies up 0.1 percent at 94.765.
ASIA'S DAY: Japan's benchmark Nikkei 225 index remained nearly flat at 22,270.39 and South Korea's Kospi lost 1.2 percent to 2,314.24.
In China, shares steadied after initial falls but remained fragile after taking a battering from worries about a wobbly yuan and the trade dispute with the United States, which has investors braced for a rocky second half of the year.
Trump's latest plans to screen foreign investments led some safe-haven investments lower.
Expectations that USA interest rates will rise just as the European Central Bank is pushing back its planned rate increases have been a key driver for a two-month rally in the dollar.
The Chinese currency weakened beyond a psychologically key 6.6 per dollar level for the first time in six months on Wednesday.
The trade-sensitive Australian dollar earlier fell 0.3% to US$0.7371, edging back towards a 13-month low of US$0.7345 plumbed last week. The Dow dropped 0.7 percent and the S&P 500 shed 0.9 percent while the tech-heavy Nasdaq Composite lost as much as 1.5 percent.
Germany's DAX was down 1.2 percent to 12,206 and France's CAC 40 shed 0.6 percent to 5,293.
ZTE Corp, China's second-largest telecommunications equipment maker, ceased major operations after the United States imposed a ban on USA suppliers in April. Stocks in Taiwan were lower but Singapore and other Southeast Asian markets were higher.
US oil prices hit a 3-1/2-year high as plunging USA crude stockpiles compounded supply worries in a market already uncertain about uncertain Libyan exports, a production disruption in Canada and Washington's demands that importers stop buying Iranian crude. Brent crude futures settled up $1.31, or 1.72 percent, at $77.62 a barrel.