The slide in Australian share prices is set to continue on Monday following a sharp fall in United States stocks on Friday.
Futures trading is pointing to a 1.8% plunge in equities when the Australian Securities Exchange (ASX) opens at 10:00 am AEDT (11:00 pm GMT Sunday) with the June contract of the ASX 200 index priced 156 points below the prior settlement at 8,343 points.
The market's direction is being driven by Wall Street, where the benchmarks ended sharply lower on Friday (Saturday AEDT) as the three-week-long U.S.-Israeli war against Iran stoked concerns about higher oil prices, inflation and the potential for higher interest rates.
The Dow Jones Industrial Average fell 1%, the S&P 500 dived 1.5% to its lowest level in six months, and the Nasdaq Composite plunged 2%.
"The market is finally settling into the idea that this may go on longer than initially expected, and I think that's why markets are selling off. This conflict may go on not for just a few weeks, but maybe beyond several months," Longbow Asset Management CEO Jake Dollarhide was quoted in a Reuters article as saying.
Australian shares had dived to a four-month low on Friday with the ASX 200 losing 0.8% to 8,428.4 points, bringing losses over the week to 2.2% for the week, over the last month to 5.9%, and so far in 2026 to 3.28% as share prices finished lower for a third straight week.
U.S. bonds were also sold off as higher oil prices raised inflation concerns, setting a pattern that has been followed in Australia.
Australian Government bond yields spiked as two-year rates climbed 1.37% to 4.872% and 10 year rates soared 1.71% to 5.858% at the time of writing.
"We just have a classic environment that is pushing rates up and it's driven by higher inflation expectations, which relate back to the oil price. And the fact that we're heading into the fourth week of the war suggests that that stress is not going away anytime soon," ING Head of Global Rates and Debt Strategy Padhraic Garvey was quoted by Reuters as saying.
