The S&P/ASX200 fell 34.2 points on Tuesday, down 0.39 per cent, to 8,657.8, as the broader All Ordinaries lost 32.8 points, or 0.37 per cent, to 8,882.6.
Energy and utilities stocks were heavy despite an uptick in oil prices, as investors took profits on hopes a US-Iran peace deal could be negotiated within days, despite US forces striking targets in southern Iran.
The two nations reportedly remain divided on the Hormuz Strait, Tehran's nuclear ambitions and frozen Iranian funds.
Financials weighed heavily on the bourse as all big four banks and Macquarie fell into the red, while insurers and investment firms also faced selling pressure.
Basic materials stocks made up the only segment to finish higher, carving a meagre 0.2 per cent improvement as BHP, Rio Tinto and South32 ballasted weakness in gold stocks.
Gold itself eased to $US4,530 ($A6,322) an ounce pushing the precious metal's sub-index one per cent lower.
Energy stocks were a sea of red, despite Brent crude edging higher to $US95.60 a barrel, still well short of the previous week's above-$US110 price and indicating investors were largely looking past resurgent tensions in the Persian Gulf.
Refinery operators Ampol and Viva energy also lost ground.
Coal miners backed off from Monday's rally, which followed a deadly fire at a mine in China that killed at least 82 people and stoked supply concerns.
Airlines were mixed, with Qantas hanging onto Monday's gains to trade flat at $9.18, while Virgin, which runs direct Middle East services substantially disrupted by the conflict, lost 1.5 per cent.
Real estate stocks, consumer cyclicals and IT companies edged lower in ultimately modest moves ahead of April consumer price index data due Wednesday.
March's CPI data delivered a notable jump, with headline inflation rising to 4.6 per cent in the year to March 2026 — the highest reading since September 2023, IG market analyst Tony Sycamore said.
The market is expecting headline inflation to ease to 4.4 per cent, while the trimmed mean is forecast to firm to 3.4 per cent.
"An outcome in line with these expectations, combined with last week's softer labour force report, should give the RBA enough cover to keep rates on hold next month," Mr Sycamore said.
In company news, bourse operator ASX Limited tumbled more than 13 per cent after raising next year's expense forecast range by $20 million to between $180 million and $200 million, driven by modernisation and its response to a regulator probe.
Online retailer Kogan swung hard in the other direction, soaring more than 18 per cent as its gross profit swelled by almost a fifth in the 10 months to April.
The Australian dollar is buying 71.65 US cents, roughly steady with 71.66 US cents on Monday at 5pm.
ON THE ASX:
* The S&P/ASX200 dropped 34.2 points, or 0.39 per cent, to 8,657.8
* The broader All Ordinaries lost 32.8 points, or 0.37 per cent, to 8,882.6
One Australian dollar trades for:
* 71.65 US cents, from 71.66 US cents at 5pm AEST on Monday
* 114.00 Japanese yen, from 113.88 Japanese yen
* 61.58 euro cents, from 61.56 euro cents
* 53.16 British pence, from 53.14 British pence
* 122.45 NZ cents, from 122.00 NZ cents
14°C