The S&P/ASX200 fell 20.1 points on Monday, down 0.23 per cent to 8,766.4, as the broader All Ordinaries dipped by 15.6 points, or 0.17 per cent, to 8,990.8.
The top-200 dropped to as low as 8,729.6 before rebounding on reports Iran had proposed delaying gridlocked nuclear talks with US officials until both sides had ended their respective blockades of the Strait of Hormuz.
"Iran has actually offered an olive branch of sorts, suggesting they're happy to prioritise the reopening of the Strait of Hormuz and to end the naval blockade before deeper nuclear negotiations," IG market analyst Tony Sycamore told AAP.
"For me, it's going to be very difficult to see the US accepting anything less than a comprehensive deal, which includes both the Strait and Iran's nuclear weapons program, but the development was positive enough to support a solid rebound in sentiment today."
Basic materials was the only sector to push significantly higher, up 0.6 per cent on the back of decent performances for BHP, Rio Tinto and most gold miners.
Gold itself edged higher to $US4,715 ($A6,583) an ounce, as improving risk sentiment kept hopes of US interest rate cuts alive.
Energy and utilities stocks were the worst performers on the bourse, with Woodside and Santos slipping despite oil prices advancing during the session.
Coal miners, uranium stocks and refinery operators also tumbled in a broad-based sell-off.
Origin Energy dragged on utilities, as five per cent of its value was wiped after production and quarterly revenue dipped at Australia Pacific LNG and earnings guidance was downgraded at major asset Octopus Energy.
The heavyweight financials sector trimmed early losses to end the day 0.5 per cent lower, as CommBank and ANZ fell 0.8 per cent but NAB managed a slim uplift.
A rebound in blood plasma giant CSL helped the health care sector achieve a meagre bounce, as the segment continues to hover at decade lows after a disastrous 2026 financial year.
Consumer staples faded as Coles and Woolworths sold off after a strong performance the previous week.
The competition watchdog's dual case against the grocery giants will resume on Tuesday, as Woolworths continues to deny regulator allegations of illusory discounts.
Atlas Arteria outperformed the ASX200, charging more than 13 per cent on the back of a $7 billion takeover bid from IFM Investors.
Gold producer Resolute Mining was at the other end of the table, down 8.2 per cent after Blackrock unloaded more than 23 million shares despite a broadly positive March quarter update on Thursday.
The Australian dollar is buying 71.65 US cents, up from 71.23 US cents on Friday, with March inflation figures expected to show an uptick in price growth as market bets narrow on a Reserve Bank interest rate hike at next week's meeting.
ON THE ASX:
* The S&P/ASX200 dropped 20.1 points, or 0.23 per cent, to 8,766.4
* The broader All Ordinaries lost 15.6 points, or 0.17 per cent, to 8,990.8
One Australian dollar trades for:
* 71.65 US cents, from 71.23 US cents at 5pm AEST on Friday
* 114.11 Japanese yen, from 114.19 Japanese yen
* 61.09 euro cents, from 60.99 euro cents
* 52.94 British pence, from 52.91 British pence
* 121.71 NZ cents, from 121.81 NZ cents
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