The S&P/ASX200 fell 78.2 points on Friday, down 0.89 per cent, to 8,741.2, as the broader All Ordinaries slumped 88.1 points, or 0.98 per cent, to 8,920.2.
The top-200 lost almost three per cent since Monday, its worst week since early March after US-led strikes on Iran sparked a broader conflict and the biggest energy supply shock in recent memory.
Share markets across the globe had been under pressure from crude prices and surging bond yields, intensifying expectations of interest rate hikes, AMP chief economist Shane Oliver said.
"The Australian share market was particularly hard hit," Dr Oliver said.
"(And) on top of worries about the impact of rising oil prices, rising bond yields which act as a drag on share market valuations and falling property prices."
Local mining stocks fell heavily on Friday, the materials sector plunging 3.6 per cent and down almost nine per cent in a fortnight as metals prices dragged.
BHP and Rio Tinto tumbled more than 3.5 per cent each as copper prices backed off from record highs, after doubts around feared US tariffs prompted investors to unwind a front-running buying spree.
Iron ore futures also fell on easing demand from China, while precious metals dipped overnight as bets narrowed the US Federal Reserve will hike its funds rate next week.
Expectations of a Reserve Bank cash rate hike on September 29 have increased to almost 79 per cent, with markets now tipping three 25 basis-point lifts by May 2027, up from two just a week ago.
The financials sector helped limit the damage on Friday, but ultimately had another negative week, down almost nine per cent since early August as housing market and credit demand concerns mounted.
Retail spending confidence continued to waver, with consumer discretionary stocks down more than 15 per cent in five straight weeks of losses.
Looking ahead, while rate hike expectations had largely been priced, ongoing geopolitical uncertainty meant oil prices could still push higher, Moomoo chief market strategist Tapas Strickland said.
"Inventory levels are low, so the potential for the oil price to remain here or go higher is still very, very real," he told AAP.
"I think the next week is still going to be relatively cautious, still being blown about effectively by what's going on in the oil market and yields."
The Australian dollar traded lower, buying 71.73 US cents, down from 72.16 US cents on Thursday at 5pm.
ON THE ASX:
* The S&P/ASX200 fell 78.2 points, or 0.89 per cent, to 8,741.2.
* The broader All Ordinaries lost 88.1 points, or 0.98 per cent, to 8,920.2
One Australian dollar trades for:
* 71.73 US cents, from 72.16 US cents at 5pm AEST on Thursday
* 110.59 Japanese yen, from 110.71 Japanese yen
* 61.79 euro cents, from 61.99 euro cents
* 53.04 British pence, from 53.22 pence
* 123.01 NZ cents, from 123.23 NZ cents
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