The S&P/ASX200 slipped 2.3 points on Monday, down 0.03 per cent, to 8,729.4, as the broader All Ordinaries rose 4.8 points, or 0.05 per cent, to 8,969.8.
"Overall, today's session has been a very cautious one, and for good reason," IG market analyst Tony Sycamore told AAP.
"We've had reports the (US-Iran) ceasefire deal seemed to be on the verge of being signed off, then footage emerging over the weekend of what appears to be naval mines floating in the Strait of Hormuz, Israel pushing further into Lebanon, and now there's been more reports of exchange of fire between the US and Iran."
Eight of 11 local sectors traded lower, while energy and materials stocks edged higher and IT stocks rocketed more than five per cent to four-month highs.
BHP, Rio Tinto and Fortescue all made gains despite iron ore futures falling below $US105 a tonne, down from $US109 a week earlier amid easing steel demand in China.
Gold stocks were broadly higher as the precious metal held its ground near $US4,515 ($A6,287) an ounce.
The energy sector's advance came despite a flat session for segment giants Woodside and Santos, as coal miners pulled ahead.
The heavyweight financials sector trimmed more than 0.3 per cent, as CommBank and ANZ shares dragged.
Australia's banks are facing pressure from slower economic growth, cooling property markets and uncertain investor sentiment, according to Justin Lin, investment strategist at Global X ETFs.
"While CBA has benefited from years of strong domestic capital flows and a premium valuation, investors are beginning to question some of the assumptions underpinning that premium," Mr Lin said.
"Concerns around slower loan growth are increasing as the domestic economy and property market cools."
Real estate trusts fell 0.7 per cent, as the auction market shows signs of cooling after the preliminary clearance rate fell to a six-year low last week.
Consumer-facing stocks lost ground, with staples and cyclicals trimming 0.3 per cent and 0.2 per cent respectively.
In company news, Droneshield tumbled more than eight per cent after more than 50 per cent of shareholders voted against the company's remuneration report in a massive first strike.
Pro Medicus outperformed the top-200, rallying more than nine per cent after signing $46 million in new and renewed contracts.
Fashion retailer Cettire rocketed by more than 25 per cent after striking a partnership with Alibaba Group's cross-border e-commerce platform, as it looks to expand its reach in China.
The Australian dollar is buying 71.83 US cents, up from 71.61 US cents on Friday at 5pm.
ON THE ASX:
* The S&P/ASX200 fell 2.3 points, or 0.03 per cent, to 8,729.4
* The broader All Ordinaries rose 4.8 points, or 0.05 per cent, to 8,969.8
One Australian dollar trades for:
* 71.83 US cents, from 71.61 US cents at 5pm AEST on Friday
* 114.48 Japanese yen, from 114.01 Japanese yen
* 61.57 euro cents, from 61.45 euro cents
* 53.31 British pence, from 53.28 British pence
* 120.24 NZ cents, from 120.16 NZ cents
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