GENIE Jafar. If you didn't already get a Devil vibe from this guy, he transforms from a massive serpent to a GIGANTIC, CRIMSON, FANGED, BLACK-TALON-HAVING, MUSCLEBOUND ABOMINATION SURROUNDED WITH PLUMES OF SMOKE AND FLASHES OF LIGHTNING, BELLOWING ABOUT HOW THE UNIVERSE IS HIS PLAYTHING. YIKES.
The thief at the beginning getting "eaten" by the Cave of Wonders.
The Cave of Wonders, period. A giant sand tiger creature with glowing eyes and a wide open mouth is...incredibly unsettling.
Abu pulling the sword out of the sword swallower's mouth in "One Jump Ahead".
The deleted ending where the Peddler reveals himself to be the Genie - supposedly cut for time, or because people would have left early and missed the gag, but maybe the REAL reason is that it would have ended the movie on an eerie note. This sequence has only been seen by the masses in storyboard form, but the combination of the Peddler/Genie's ominous vocal tone, dramatic music in the background, the sudden unexpected "poof" transformation, and the fast pace of the sequence gives it a strong scare factor. Then, to top it off, the Genie "makes ya look" as in the final ending, except that he does so by letting out a really shrill scream.