Regional shares were on track for a strong close to the week after a buoyant session on Wall Street, but that came to a screeching halt on news of a missile strike in Iraq.
The risk appetite was also being supported by a more accommodative policy from China's central bank and the impending signing of a "phase one" trade deal on Jan 15.
But it all changed when United States President Donald Trump ordered an attack in the Iraqi capital on Qasem Soleimani, commander of the Quds Force in Iran's Revolutionary Guards. Mr Trump then tweeted a picture of the Stars and Stripes after the killing. Teheran has vowed to avenge the death.
"We are only into the third day of the new year, and a big fat dollop of geopolitical uncertainty has already landed on investors' desks this morning," said Oanda Asia-Pacific senior market analyst Jeffrey Halley.
The strike prompted investors to flee into safe-haven assets like gold, with the yellow metal trading at four-month highs. Oil was up 3 per cent and stocks pared early gains.
"I expect tensions to intensify before abating, and we should anticipate defensive strategies to flourish," noted AxiTrader chief Asia market strategist Stephen Innes.
The Straits Times Index (STI) lost some early gains to close at 3,238.82, down 13.18 points, or 0.4 per cent. But the blue-chip index still gained 12.29 points, or 0.4 per cent, for the week. Elsewhere in the Asia-Pacific, China and Hong Kong ended lower but Australia's ASX 200 added 0.6 per cent, thanks to energy stocks after oil's climb on supply fears. Taiwan, South Korea and Malaysia also posted gains.
Trading volume was 1.67 billion shares worth $1.05 billion, with losers beating gainers 275 to 169.
Yangzijiang Shipbuilding continued to be the STI's most actively traded counter, rising 0.9 per cent to $1.17 with 66.4 million shares changing hands.
In line with risk-averse sentiment kicking in, the banks ended lower. United Overseas Bank was down 0.2 per cent at $26.63, DBS fell 0.4 per cent to $26 and OCBC Bank dipped 0.1 per cent to $11.02.
Sembcorp Industries slid 1.3 per cent to $2.28 after acquiring Veolia's public waste collection and cleaning businesses in Singapore for $28 million.
Second-liner Creative Technology jumped 4.6 per cent to $3.39 after announcing it will launch Super X-Fi Gen2 - an improved version of the Super X-Fi audio profile that caused its stock price to spike in 2018 - at next week's consumer technology trade show CES 2020.