The S&P/ASX200 fell 69.4 points on Friday, down 0.82 per cent to 8,428.4, as the broader All Ordinaries lost 62.4 points, or 0.72 per cent, to 8,628.3.
The All Ordinaries, which comprises the bourse's 500 most-valuable companies, is trading at its lowest value since June, falling for three straight weeks since the US and Israel began bombing Iran in early March, sparking a broader regional conflict.
The top 500 has dropped from all-time highs by eight per cent since the fighting began, wiping more than $273 billion from its formerly $3.2 trillion market cap in three weeks.
Market moves were dependent on energy price volatility and the outlook for the conflict remained highly uncertain, Capital.com senior market analyst Kyle Rodda said.
"Higher inflation and lower growth is kryptonite to stocks," Mr Rodda told AAP.
"We're still in the midst of the war and for as long as that lasts I think things can be fairly bearish and certainly very volatile."
Australia's heavyweight mining sector has been hammered, with basic materials crumbling more by more than a fifth since the conflict began, putting the segment in a technical bear market.
"Naturally, the sector is going to be the worst-impacted by the crisis because of the impact on economic growth," Mr Rodda said.
"Also, we've seen a fairly significant drawdown in gold prices, mostly due to rate expectations changing and the US dollar surging."
Gold is trading hands at $US4,696 ($A6,628) an ounce, down from January's $US5,595 record peak.
Local energy stocks have surged more than 16 per cent higher since the conflict started, with strong gains for coal miners, Woodside and Santos.
Uranium stocks weren't so fortunate, as the dimming outlook for economic growth weighed on narratives around the global data centre build-out.
The financial sector was relatively resilient throughout the week, despite Morgan Stanley flagging economic headwinds for Australia's major banks.
Commonwealth Bank shares actually gained more than one per cent since Monday to trade at $175.64, while Westpac edged higher but NAB and ANZ fell behind.
With the fog of war shrouding the outlook, AMP is forecasting about a 15 per cent slump in equities markets from recent highs.
"Global and Australian share markets are at high risk of further falls in the near term in response to the war with Iran," AMP chief economist Shane Oliver said.
This was against a backdrop of stretched valuations, political uncertainty around US President Donald Trump and the US midterm elections, and increasing worries about private credit and artificial intelligence valuations, Dr Oliver said.
The Australian dollar is buying 70.86 US cents, up from 70.37 US cents on Thursday afternoon.
The Aussie's appreciation came as bets narrowed on more interest rate hikes in 2026 following hawkish pivots from major central banks in the US, the UK and the EU.
Local markets are leaning towards three further rate increases in 2026, which would take the cash rate to 4.85 per cent, a level not seen since 2008.
ON THE ASX:
* The S&P/ASX200 dropped 69.4 points, or 0.82 per cent, to 8,428.4
* The broader All Ordinaries fell 62.4 points, or 0.72 per cent, to 8,628.3
One Australian dollar trades for:
* 70.86 US cents, from 70.37 US cents at 5pm AEDT on Thursday
* 112.25 Japanese yen, from 112.37 Japanese yen
* 61.32 euro cents, from 61.37 euro cents
* 52.87 British pence, from 53.04 British pence
* 120.54 NZ cents, from 121.01 NZ cents
