The S&P/ASX200 fell 125.5 points on Monday, down 1.45 per cent, to 8,505.3, as the broader All Ordinaries tumbled 135.2 points, or 1.52 per cent, to 8,735.4.
Local shares followed a weak finish from global equities on Friday, after bond yields surged on inflation concerns, and as oil prices surged after fresh attacks in the Middle East and modest results from US meetings with key Iran ally China.
"While last week's Trump-Xi meeting offered a glimmer of optimism, China has since shown little appetite for helping to reopen the Strait of Hormuz," IG market analyst Tony Sycamore said.
"And why would it? President Trump has been Beijing's chief antagonist for over a decade, and with ample strategic reserves on hand, China can afford to let the US sit in an uncomfortable spot of its own making for a little longer."
Energy stocks were the only sector to carve out a gain for the session, while basic materials, industrials stocks and real estate trusts weighed heavily as traders mulled a sustained high fuel cost and interest rate environment.
Woodside and Santos each charged more than 2.6 per cent higher each, as Brent crude hovered near $US111 a barrel and as Santos delivered first oil from its Pikka project in Alaska.
Refinery owners Viva and Ampol advanced, while coal producers were mixed and uranium stocks continued to sell off.
Industrials stocks fell four per cent after Brambles' value plummeted by a more than a fifth after a shock profit guidance downgrade, which cut its expected 2026 financial year profit range roughly in half.
Miners were also under pressure, with basic materials down 2.8 per cent as iron ore and copper futures retreated, taking BHP, Rio Tinto and Fortescue with them after China's year-to-April industrial production fell to 4.1 per cent, missing forecasts of 6.0 per cent.
Gold has fallen to $US4,544 ($A6,362) an ounce, dragging on ASX-listed miners and taking the gold sub-index four per cent lower.
Lynas Rare Earths offered a rare glimmer of optimism for the segment, advancing 5.5 per cent to $18.93.
Financials were sluggish, falling 0.3 per cent as CommBank shares continued their modest recovery from the previous week's $30 billion sell-down, while NAB, Westpac and ANZ lost ground.
Consumer-facing stocks lost 0.9 per cent amid broad-based weakness, while real estate and health care stocks were under particular pressure.
In company news, shares in agribusiness group Elders plummeted by almost 23 per cent after costs from its cloud-based migration weighed on its first-half earnings.
The Australian dollar is buying 71.48 US cents, down from 71.59 US cents on Friday at 5pm.
ON THE ASX:
* The S&P/ASX200 dropped by 125.5 points, or 1.45 per cent, to 8,505.3
* The broader All Ordinaries tumbled 135.2 points, or 1.52 per cent, to 8,735.4
One Australian dollar trades for:
* 71.48 US cents, from 71.59 US cents at 5pm AEST on Friday
* 113.58 Japanese yen, from 113.44 Japanese yen
* 61.43 euro cents, from 61.54 euro cents
* 53.52 British pence, from 53.63 British pence
* 122.23 NZ cents, from 122.22 NZ cents
14°C