The S&P/ASX200 fell 110.1 points by midday, down 1.28 per cent, to 8,520.7, as the broader All Ordinaries slipped 118.9 points lower, or 1.41 per cent, to 8,745.8.
The slip came after Wall Street's gravity-defying, record-breaking ran out of steam on Friday, wiping out the previous two session of gains as artificial intelligence hype and strong tech earnings collided with worsening inflation worries.
"Risk sentiment took a hit at the end of last week as nerves around the Middle East conflict and its inflationary consequences resurfaced," Westpac economist Ryan Wells said.
"A global bond rout saw longer-dated yields jump to fresh highs across some jurisdictions, as markets now expect tighter monetary policy sooner."
Energy stocks made up the only local sector advancing on Monday morning, with Santos and Woodside rallying more than two per cent each as Brent oil soared above $US111 for the first time in two weeks.
Refinery operators Viva and Ampol also improved, the increase in crude prices coming after reports a drone strike caused a fire at a nuclear power plant in the United Arab Emirates and as efforts to end the US-Israeli war on Iran appear stalled.
The basic materials sector weighed heavily after a stellar run the previous week, with mega miners BHP, Rio Tinto and Fortescue each tumbling 2.4 per cent or more.
Gold miners were a sea of red, as the precious metal slipped to $US4,535 ($A6,360) an ounce, dragging the All Ordinaries gold sub-index four per cent lower.
Lithium miners Liontown and PLS bucked the trend with minor gains,while Lynas Rare Earths soared more than five per cent higher.
Financials eased with a mixed performance from the big four banks, with CommBank and Westpac eking minor advances while ANZ and NAB fell behind.
Consumer-facing stocks also sold-off, with staples and cyclicals each slipping roughly 0.8 per cent.
Real estate trusts underperformed the bourse, the segment diving 2.5 per cent as the domestic economic outlook continued to dim.
In company news, Santos has delivered first oil from its Pikka project in Alaska, targeting a production plateau of 80,000 barrels of oil during the third quarter.
Shares in agribusiness giant Elders dropped by almost a quarter despite posting an improved first-half statutory net profit of $39.5 million, as it warned of the impact of fuel prices on the industry.
The Australian dollar is buying 71.27 US cents, down from 71.59 US cents on Friday at 5pm, easing from its recent rally as investors mulled global central banks playing catch-up with the already-hawkish RBA.
