The benchmark S&P/ASX200 fell 34.4 points by midday on Monday, down 0.38 per cent, to 9,041.6 as the broader All Ordinaries lost 37.5 points, or 0.4 per cent, to 9,233.9.
Wall Street indices fell overnight, after Brent crude topped $91 a barrel as the US and Iran exchanged strikes, presenting fresh inflation risks ahead of key interest-rate decisions for global central banks this month.
"The rise in oil is particularly important for markets because it adds another potential source of inflationary pressure just as investors are reassessing the US Federal Reserve's interest-rate outlook," Moomoo market strategy consultant Greg Boland said.
Both US and Australian bond yields have surged, with US 10-year yields reaching 4.8 per cent for the first time since early 2025, while Aussie 10-year yields hit a six-month high near 5.16 per cent.
Markets have a September interest-rate hike by the Reserve Bank as a coin-toss decision, and have fully priced in a 25 basis point increase to 4.6 per cent by November's meeting.
Energy stocks were the only real success story on Tuesday morning, the segment up 1.6 per cent and tracking with similar gains in Santos, Woodside and Ampol.
Utilities and health care, traditionally defensive sectors, also advanced more than 0.6 per cent each.
CSL added an extra 1.3 per cent to $173 per share after inking a drug price deal with the Trump administration, and is up 92 per cent from June's lows near $90.
The heavyweight financials sector handed back some of Monday's bounce, easing 0.6 per cent, as CommBank led the big four banks lower to trade at $158.75 per share.
Retail stocks tumbled, with cyclicals down 2.6 per cent and staples shedding 1.8 per cent, as ANZ's consumer confidence fell after four straight weeks of gains, finally giving way to rate-hike worries.
Local technology stocks were also heavy as the idea of higher borrowing costs weighed on traders' minds, the group down 1.7 per cent in a broad-sector sell-off.
Resources traded flat, as an uplift in gold producers and modest gains in BHP and Rio Tinto helped ballast a mixed session elsewhere.
Gold was trading near $US4,442 ($A6,193) an ounce, while copper prices hovered near record highs and iron ore futures approached $US100 a tonne.
In company news, Telix Pharmaceuticals has appointed David Gill to chair its board.
Collins Foods shares jumped 2.5 per cent after the KFC operator's trading update reported strong sales growth to kick off the new financial year.
The Australian dollar was buying 71.72 US cents, up from 71.61 US cents on Monday at 5pm.
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