US traders on Monday are likely to turn to a debate in Congress on whether to launch a military strike in Syria.
US Secretary of State John Kerry said the US was "not going to war" with Syria but was planning a "very limited, very targeted, very short-term" strike.
Speaking in London where he was holding with British Foreign Secretary William Hague, Kerry warned that that it was be riskier to avoid action than to intervene.
The US has urged Syrian President Bashar al Assad to hand over his chemical weapons after allegedly using them against civilians on August 21st.
President Barack Obama has proposed force against Assad's regime which will be put to Congress to vote this week with a debate starting on Monday.
"If Congress supports Obama's call for military action, which looks likely after House Speaker, John Bohner confirmed his support for a response, air strikes could begin as early as this week," said Craig Erlam, Market Analyst at Alpari Research.
"In terms of how this effects the markets, in the lead up to the decision and probably shortly after, we're likely to see a lot of risk aversion, as we're seeing this morning. However, historically, following limited military reaction from the US, the markets have rallied as the uncertainty fades."
Russian Foreign Minister Sergei Lavrov has warned Western leaders that any military strikes would cause an "outburst of terrorism" in the region.
Russian President Vladimir Putin said he would back Syria against any strike during the G20 summit last week after which Assad thanked the leader.
Also moving markets is the potential tapering of monetary stimulus at the US Federal Reserve's policy meeting on September 17th to 18th.
Disappointing jobs data last week have prompted some economists to readjust their forecasts to say the Fed is unlikely to start trimming quantitative easing at the meeting.
US non-farm payrolls data missed expectations, with employers adding 169,000 workers in August.
The unemployment rate fell to 7.3% last month from 7.4% in July but the decline occurred due to a contraction in the workforce rather than because people got more jobs.
Meanwhile, providing some relief to markets was the release of better than expected data from China.
China's exports rose 7.2% in August from a year earlier, the General Administration of Customs revealed, beating the 5.5% estimate.
On the company front, Apple rose before an investor event on Tuesday which will reveal the latest models of the iPhone.
Delta Airlines jumped following reports the carrier will replace BMC Software Inc. in the S&P 500.
Expedia railed as the online travel services provider was raised to 'buy' from 'neutral' by Lazard Capital Markets LLC.