Stocks have retreated from record highs after a fresh US military strike on Iran and Kuwaiti reports of missile attacks dented investor confidence in a peace deal that many see as key to easing global inflation risks.
Oil rose as much as 4 per cent and bond prices tumbled as the escalation muddied signals on peace talks, after US President Donald Trump dismissed an Iranian report of a deal to resume traffic through the Strait of Hormuz.
"Over the next two weeks, we expect either a deal for a new ceasefire, or the current ceasefire will have collapsed with active hostilities resuming," said Madison Cartwright, a senior geo-economics analyst at CBA.
