Australian shares slumped at Thursday's open after United States President Donald Trump called off an interim peace agreement with Iran, despite a rebound in battered semiconductor stocks in New York.
By 10:25 am AEST (12:25 am GMT), the ASX 200 index had fallen 0.9%.
The lower start follows a weaker session on Wall Street where investors reacted to Trump saying an interim deal aimed at ending the war in the Middle East was "over".
Although Trump later appeared to soften his remarks, his initial statement at a NATO summit in Turkey forced oil prices higher and revived inflation worries that may influence the direction of U.S. interest rates.
The Dow Jones Industrial Average bore the brunt of selling, dropping 1.1%, while the S&P 500 shed 0.3%, but the Nasdaq Composite added 0.2% on Wednesday (Thursday AEST).
"Duration is the key here. How long does this go on?" U.S. Bank Wealth Management Senior Investment Strategist Rob Haworth was quoted here as telling Reuters.
"If we see damage to Iranian infrastructure, the market may have to respond more seriously to that because there's likely Iranian retaliation."
Helping keep the Nasdaq in the black was a rally in Broadcom stock after Apple announced a new agreement with the chip supplier.
The Australian market had ended down a little on Wednesday with the ASX 200 Index falling 0.2% to 8,785.1 points.
In fixed interest markets, yields on Australian Government bonds rose strongly, with two-year rates up 2.10% to 4.570% while 10-year rates adding 1.94% to 4.932% at the time of writing.
