The S&P/ASX200 fell 55.2 points on Thursday, down 0.62 per cent, to 8,911.1, as the broader All Ordinaries lost 59.1 points, or 0.64 per cent, to 9,126.8.
Oil fell to its lowest price since March 2, the day markets opened after the US and Israel launched air strikes on Iran, ultimately sparking the biggest energy supply shock in history.
The slump wasn't enough to keep the Australian raw materials sector's recent run alive, after a US Federal Reserve meeting foreshadowed US interest rate hikes, lifting the greenback but weighing on metals prices and global growth hopes.
"Major miners remain caught between longer-term demand themes and near-term macro pressure, leaving the sector vulnerable to further swings in commodity prices, the U.S. dollar and China-related headlines," Vantage senior market analyst Hebe Chen told AAP.
Gold stocks' recent rally came to an end as the precious metal eased to $US4,300 ($A6,115) an ounce, dragging the gold sub-index 1.8 per cent lower.
Mega-cap miners BHP, Rio Tinto and Fortescue fell behind, tracking with weaker base metal prices, while battery minerals and rare earths producers also dipped.
The financials sector also lost ground, with three of the big four banks trading lower as investors reassessed their exposure to interest rate-sensitive stocks.Â
"A higher-for-longer rate environment can help protect net interest margins, but it also risks softening credit demand and putting more pressure on borrowers, leaving the major banks facing a more uncertain near-term backdrop," Ms Chen said.
The energy sector tumbled 1.2 per cent as fading oil prices weighed on Woodside and Santos, while coal producers and most uranium stocks also lost ground.
Investors sought cover in more defensive sectors, consumer staples and health care outperforming and making two of only three segments to end the session higher.
Industrials was the third, thanks in part to decent performances from Transurban, Computershare and SGH, which jumped 2.7 per cent after investment group Morgans was impressed its recent investor day.
In company news, Qantas shares ended the session only marginally better than flat, after pushing back the launch date for its super long-haul Sydney-to-London route to October 2027.
Despite the broader downturn, the picture for Australian equities was constructive, Global X senior investment strategist Marc Jocum said.
"Importantly, this looked more like healthy consolidation than panic selling," he said.
"While Australia paused for breath, several Asian markets, including Japan and South Korea, continue to push towards or reach fresh record highs, suggesting risk appetite hasn't disappeared entirely but is simply becoming more selective."
The Australian dollar is buying 70.38 US cents, down from 70.58 US cents on Wednesday at 5pm.
ON THE ASX:
* The S&P/ASX200 fell 55.2 points, or 0.62 per cent, to 8,911.1
* The broader All Ordinaries lost 59.1 points, or 0.64 per cent, to 9,126.8
One Australian dollar trades for:
* 70.38 US cents, from 70.58 US cents at 5pm AEST on Wednesday
* 113.05 Japanese yen, from 113.10 Japanese yen
* 61.09 euro cents, from 60.80 euro cents
* 52.86 British pence, from 52.62 British pence
* 121.54 NZ cents, from 121.29 NZ cents
10°C