This puts you into eval territory:

for var in var1 var2 varx; do
  eval 'val=$'"$var"
  if [ -z "$val" ]; then
    eval "${var}=-"
  fi
done

Note that any source that can provide arbitrary variable names can abuse this to run arbitrary code; ensure that you only use it in scenarios, like the above, where the values for var are under your control.

As @hek2mgl first mentioned, you can assign a default value to a variable if it does not already have a value with

: ${var1:=--}
: ${var2:=--}
: ${var3:=--}
# etc

Note that this takes more space than a loop would, but it is more readable, as it doesn't require any indirection to decipher.

I solved it by creating an array arr, instead of having multiple variables ,iterating over the elements of the array and replacing empty ones with --

for element in "${!arr[@]}"; do
   out[$element]=${out[$element]:---}
 done

Bash allows you to do recursive substitution of variable names, so you can use things like ${var${suffix}}, but sh(1) doesn't, so you have to use eval expressions to allow for deferred variable expansion, like in:

#!/bin/sh

TEMPFILE="/tmp/defaults.sh-$$"
trap 'rm -f "$TEMPFILE"' 1 2 3 15

# FORMAT IS FIRST WORD IS VARIABLE NAME, REST OF LINE IF DEFAULT VALUE.
cat > "$TEMPFILE" << EOF
A default value for variable A
B default value for variable B
C default value for variable C
PATH /bin:/usr/bin
HOME $HOME
EOF

while read name value
do
    eval echo "$name==\$$name"
    if 
        [ -z "`eval echo \\\$$name`" ]
    then
        echo "$name=\"$value\""
        eval "$name=\"$value\""
    fi
done <"$TEMPFILE"

while read name dumb
do
    eval echo "[$name] =\> \$$name"
done >&2 <"$TEMPFILE"
rm -f "$TEMPFILE"

I've used a temporary file, as I make two passes through it (I did this for debugging purposes) but if you don't need the second pass, just do

#!/bin/sh

while read name value
do
    eval echo "$name==\$$name"
    if 
        [ -z "`eval echo \\\$$name`" ]
    then
        echo "$name=\"$value\""
        eval "$name=\"$value\""
    fi
done <<EOF
A default value for variable A
B default value for variable B
C default value for variable C
PATH /bin:/usr/bin
HOME $HOME
EOF

So, finally, without traces, you get something like this:

#!/bin/sh

while read name value
do
    if [ -z "`eval echo \\\$$name`" ]
    then
        eval "$name=\"$value\""
    fi
done <<EOF
A default value for variable A
B default value for variable B
C default value for variable C
PATH /bin:/usr/bin
HOME $HOME
ANOTHER_VARIABLE default value for ANOTHER_VARIABLE.
EOF

NOTE

I have tested this against GNU Bash and FreeBSD Bourne Shell. The golden test should be to test it against AT&T V7 bourne shell, but I don't have one at hand to make the tests. My apologies for that (but working on it!) :)