The Australian share market has fallen, shaken by an offhand comment by US President Joe Biden and ahead of another set of US jobs figures that could reset expectations on interest rate cuts.
The benchmark S&P/ASX200 index on Friday finished 55.2 points lower at 8,150.0, a fall of 0.67 per cent, while the broader All Ordinaries dropped 57.7 points, or 0.68 per cent, to 8,416.6.
The Australian dollar was buying 68.46 US cents, down from 68.74 US cents at Thursday's ASX close.
Overnight, President Biden told reporters outside the White House that the US was "in discussion" about the possibility Israel might attack Iran's vast oilfields in retaliation for its missile barrage.
"I think that would be a little ..." the 81-year-old American president said, before stopping mid-sentence.
"Anyway," he said.
The off-the-cuff remark sent shockwaves through markets, with Brent crude jumping $US2 to $77.50 a barrel.
Observers have speculated that Israel's retaliation would not come until after Rosh Hashanah, the Jewish new year, which ends at sundown on Friday.
Traders were also waiting for the September US non-farm payrolls report to be released on Friday night AEST.
The ASX200 dropped 0.76 per cent for the week, snapping its three-week winning streak.
AMP chief economist Shane Oliver said the moves were not big but indicated shares were vulnerable in the short term after their surge in September to record highs.
Share markets would quickly settle down if Israel's response was proportional and directed at Iranian military facilities, but a strike on Iran's nuclear facilities, oil production sites or oil-exporting infrastructure could leave equities in for a much bumpier ride, Dr Oliver said.
If the conflict escalated and Iran blocked the Strait of Hormuz, oil could surge back to its post-Ukraine invasion highs of $US120 a barrel, adding 50 cents or more a litre at the petrol bowser for Aussie motorists, he said.
On Friday, nine of the ASX's 11 sectors finished lower and two closed higher.
Health care rose 0.1 per cent and energy rose 1.8 per cent on the back of the spike in oil prices.
Woodside gained 2.2 per cent, Santos added 2.1 per cent and Ampol rose 2.9 per cent.
On the flip side, the mining sector was the biggest loser, dropping 1.2 per cent.
BHP dropped 1.7 per cent to $44.58, Rio Tinto retreated 1.9 per cent to $123.68 and Fortescue fell 1.1 per cent to $19.76.
All of the big four banks finished lower as well.
Westpac fell 1.9 per cent to $30.14, CBA subtracted 1.4 per cent to $132.74 and ANZ and NAB both lost 1.5 per cent, to $29.64 and $36.43 respectively.
Insurance companies gained ground amid the possibility that interest rate cuts might be delayed.
Speaking broadly, lower rates hurt insurance companies' bottom lines as they must keep policyholders' premiums in short-term investments in anticipation of claims.
IAG gained 1.8 per cent, Suncorp rose 1.3 per cent and health insurer Medibank Private advanced 1.1 per cent.
The Australian dollar was buying 68.42 US cents, down from 68.74 US cents at Thursday's ASX close.
Looking forward, minutes from the Reserve Bank's last meeting will be released on Tuesday, and Federal Reserve minutes on Wednesday.
RBA and Fed officials will also make various speeches during the week.
ON THE ASX:
* The benchmark S&P/ASX200 index finished Friday down 55.2 points, or 0.67 per cent, at 8,150.0
* The All Ordinaries dropped 57.7 points, or 0.68 per cent, at 8,416.6
CURRENCY SNAPSHOT:
One Australian dollar buys:
* 68.42 US cents, up from 68.74 US cents at Thursday's ASX close
* 100.06 Japanese yen, from 100.62 yen
* 62.01 euro cents, from 62.27 euro cents
* 52.04 British pence, from 52.08 pence
* 110.26 NZ cents, from 110.05 NZ cents
