The ASX200 has plunged back under 7,000 amid fears the Israel-Hamas war might broaden into a regional conflict.
The benchmark index on Thursday closed down 96 points, or 1.36 per cent, to a 10-day low of 6,981.6, while the broader All Ordinaries dropped 93 points, or 1.28 per cent, to 7,172.7.
"The ASX200 has been poleaxed today," said IG market analyst Tony Sycamore.
A risk-off sentiment prevailed as Iran's foreign minister urged further action against Israel following the deadly hospital blast in Gaza, which each side has blamed on the other. Pro-Palestinian protests erupted across the Middle East and beyond.
US bond yields climbed further following Tuesday's better-than-expected retail sales data, with 10-year Treasuries hitting a fresh 16-year high of 4.9 per cent.
Closer to home, the Australian dollar fell to a one-week low against its US counterpart after the Australian Bureau of Statistics reported mixed labour market data for September.
The unemployment rate ticked down to 3.6 per cent, from 3.7 per cent in August, but fewer new jobs were added to the economy than had been expected.
"All up, today's report is not the type of 'red flag' the RBA would need to see to justify a rate hike at the November policy meeting," said Betashares chief economist David Bassanese.
But there is still a non-negligible risk of a Melbourne Cup Day rate hike, Mr Bassanese indicated, with much depending on next week's third-quarter consumer price readout.
Every sector of the ASX closed lower on Thursday, with tech the biggest loser, dropping 1.8 per cent.
The Big Four banks all lost ground, with Westpac down 1.4 per cent to $21.15, CBA dropping 1.6 per cent to $99.78, NAB falling 1.5 per cent to $29.12 and ANZ finishing 0.7 per cent lower at $25.63.
Woolworths fell 1.3 per cent to a two-month low of $36.79 and Wesfarmers dropped 1.7 per cent to a week-and-a-half low of $51.70.
In the heavyweight mining sector, BHP dropped 1.4 per cent to $45.23, Rio Tinto retreated 1.7 per cent to $115.47 and Fortescue dipped 0.2 per cent to $21.87.
Goldminers finished in the green, however, as the safe haven asset hit a two-month high of $US1,946 an ounce and a fresh all-time high in Australian dollar terms, at $3,096.74 an ounce.
Evolution gained 0.3 per cent to $3.60, Newcrest was basically flat at $25.14 in its final few days of trading before its acquisition by Newmont is done and dusted, and Northern Star rose 4.4 per cent to $11.98 on a quarterly production report.
CMC Markets APAC & Canada analyst Tina Teng said that the fears of escalation in the Middle East conflict was lifting haven assets such as gold and the US dollar, and pressuring equities and commodity currencies.
Elsewhere, Qantas fell 2.5 per cent to $4.74 and Alliance Aviation was flat at $3.15 as both companies decided to walk away from their $614 million deal for Qantas to acquire Alliance, a charter airline operator that mostly serves the resource industry.
The Australian Competition and Consumer Commission said in April that it would oppose the acquisition, which was first announced in May 2022, and the pair did not see a reasonable path forward for it.
The Australian dollar was buying 63.09 US cents, from 63.87 US cents at Tuesday's ASX close.
ON THE ASX:
* The S&P/ASX200 index finished Thursday down 96 points, or 1.36 per cent, at 6,981.6
* The All Ordinaries dropped 93 points, or 1.28 per cent, to 7,172.7
CURRENCY SNAPSHOT:
One Australian dollar buys:
* 63.09 US cents, from 63.87 US cents at Wednesday's ASX close
* 94.49 Japanese yen, from 95.63 yen
* 59.87 Euro cents, from 60.33 Euro cents
* 52.00 British pence, from 52.35 pence
* 108.21 NZ cents, from 107.99 NZ cents
