The S&P/ASX200 lost 29.5 points by midday on Friday, down 0.33 per cent to 8,925.5, as the broader All Ordinaries fell 27.3 points, or 0.29 per cent, to 9,147.2.
Equities have come under pressure from resurgent oil prices, as the best hopes around peace deals in the Middle East give way to ongoing crude supply concerns, Westpac economist Luka Belobrajdic said.
"Market sentiment cooled overnight, with investors reassessing the near‑term prospects for a US-Iran peace deal amid indications from regional and European leaders that negotiations could take several months to conclude," he said.
Further US-Iran peace talks could take place this weekend, and US President Trump again told reporters he believes the two nations are close to a deal.
The top-200 index is on track to end the week 0.36 per cent lower, with Australia's big banks weighing heavily as investors who rode the bounce from early April sold their positions after the financials sector hit new all-time highs on Tuesday.
National Australia Bank has trailed its big four competitors for most of the week, and was down 1.5 per cent on Friday to $42.76.
Commonwealth Bank shares slipped 0.4 per cent to $177.43 and have lost more than three per cent since Monday.
ASX-listed miners have also been running out of steam since Wednesday, but the segment is still headed for a fourth straight week of gains.
Mining giants BHP and Rio Tinto were edging lower on Friday, despite an ultimately positive week for iron ore futures, which are trading near $US106.50 a tonne.
Gold stocks have also dragged on the bourse, as the precious metal hovers near $US4,791 ($A6,689) an ounce and the All Ordinaries gold sub-industry index eyes an ultimately flat five-session performance.
The energy sector was trading broadly flat, as Santos crept up a bit and Woodside slipped, with the West Texas crude benchmark ticking up to $US93.40 a barrel and Brent crude oil at a similar level.
Oil refinery owner-operator Viva Energy remains in a trading halt after a fire broke out at its Geelong refinery on Wednesday night.
The blaze has reduced about 40 per cent of the facility's total petrol production capacity, and a fifth of its diesel and aviation fuel capacity.
Uranium stocks have continued a recent run higher, led by a 3.4 per cent lift in Paladin Energy as it raised its full-year production guidance.
Retailers were the weakest-performing sector as Bunnings owner Wesfarmers continued to languish, down almost two per cent on Friday and shedding 4.6 per cent for the week so far.
In company news, buy now, pay later offering Zip Co beat out the top-200 with a 16.1 per cent charge to $2.38 after posting record quarterly cash earnings and boosting its guidance.
The Australian dollar was buying 71.62 US cents, down from 71.88 US cents on Thursday, when it hit a nearly four-year high.
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