US stocks were set to open lower as tensions between Syria and the West mounted.
US Secretary of State John Kerry said Obama would hold Syria's government under the Assad regime accountable for the use of chemical weapons against civilians near Damascus last Wednesday.
His comments rattled markets and fuelled speculation on the potential involvement of the US in Syria's crisis.
Obama spoke with Australian Prime Minister Kevin Rudd on Monday about possible international responses and they expressed their grave concern about the incident that claimed the lives of hundreds of men, women and children.
The US has so far avoided military intervention to remove Assad due to divided views between global leaders on how to handle the situation in Syria.
Ishaq Siddiqi, Market Strategist at ETX Capital, said the US would have to tread carefully over how it chooses to respond as it risks triggering a flare up of the unrest in the Middle East and hurting its relations with countries against intervention such as Russia.
Alpari Research Market Analyst, Craig Erlam, added: "I still think we're not close to any intervention, regardless of how clear cut the evidence appears, given the objections within the United Nations, particularly from Russia. As such, the weakness in the markets to the comments are only likely to be temporary."
The turmoil in Syria saw the price of oil surge with Brent crude hitting fresh six month highs. It was up $2 to $112.990 at 13:28 in London.
Also weighing on equities were fears of another drawn out battle over the debt ceiling in Congress with some reports suggesting the ceiling could be hit in October, potentially prompting further spending cuts as part of negotiations between Democrats and Republicans.
Looking ahead, investors will turn their focus to consumer confidence figures out in the US at 10:00 in New York. The Conference Board is expected to reveal the consumer confidence index fell to 79 this month from 80.3 in July, according to forecasts.
The S&P/Case-Shiller index of house prices in 20 cities is anticipated to jump 12.1% in June compared to the prior year when unveiled at 9:00 in New York.
The US government is set to sell $34bn of two-year notes on Tuesday, the first of three auctions totalling $98bn this week.
Investors expect US 10-year yield to rise
The US benchmark 10-year yield is expected to rise to about 3%, according to Financial Times columnist Michael Mackenzie.
The yield is currently at 2.8% and investors are waiting to see if the benchmark will end the month above a critical bullish level of 2.7% [a potentially significant technical signal for traders] that has held since June 2007.
"Since selling erupted in May as the market began pricing in the Federal Reserve's intention to start reducing its bond purchases, the benchmark 10-year yield has made a series of new highs and failed to attract the type of significant buying that would establish a long-term top is in sight," Mackenzie said.
The Federal Reserve is weighing up whether to start trimming its $85bn per month in quantitative easing. The market consensus that the central bank will make its move at its next meeting in September.