About A$50 billion was wiped from the value of Australian shares on Thursday as the ASX suffered its sharpest decline in six months amid rising oil prices and growing fears over interest rates.
The benchmark S&P/ASX 200 fell 1.8 per cent to about 8,752 points in morning trading, reaching a two-month low. The sell-off followed losses on Wall Street, where the Dow Jones, S&P 500 and Nasdaq all closed lower.
Brent crude climbed above US$101 a barrel after a fresh escalation in the conflict involving the United States and Iran raised concerns about disruption to oil supplies. Higher fuel costs have fuelled fears that inflation could remain elevated and force central banks to raise borrowing costs further.
Investors have consequently reduced their exposure to shares, with higher bond yields making fixed-income assets more attractive and increasing the cost of borrowing for companies.
The decline was broad-based, with almost every major sector falling in early trading. Financial and mining stocks were among those under pressure, while the Australian dollar slipped to about 72 US cents.
Markets are now watching oil prices and global interest-rate expectations closely as traders assess how prolonged geopolitical tensions could affect inflation, economic growth and corporate profits.
