Ukraine mobilized for war on Sunday and Washington threatened to isolate Russia economically after President Vladimir Putin declared he had the right to invade his neighbour in Moscow's biggest confrontation with the West since the Cold War.

"This is not a threat: this is actually the declaration of war to my country," Ukrainian Prime Minister Arseny Yatseniuk said in English. Yatseniuk heads a pro-Western government that took power in the former Soviet republic when its Moscow-backed president, Viktor Yanukovich, was ousted last week.

Putin secured permission from his parliament on Saturday to use military force to protect Russian citizens in Ukraine and told US President Barack Obama he had the right to defend Russian interests and nationals, spurning Western pleas not to intervene.

Financial markets reacted to the escalating tensions when trading opened in Asia on Monday, with oil and wheat futures jumping and stock indexes falling.