The S&P/ASX200 fell 66.8 points on Thursday, down 0.77 per cent to 8660.9, as the broader All Ordinaries gave up 71.4 points, or 0.8 per cent, to 8823.2.
Local shares tracked a weak overnight session from global counterparts, with US markets easing as traders mulled tightening borrowing conditions, while European bond yields spiked as France's sovereign debt woes raised fears about other Eurozone economies.
Local banks and miners weighed heavily, as concerns about the domestic economy and global growth continued to loom large.
"The weakness in the banks looks like a confluence of cyclical and valuation pressures, with earnings expectations being revised lower at a time when higher mortgage rates are putting further pressure on housing and already-fragile consumer confidence," Global X senior investment strategist Marc Jocum said.
"The RBA's latest interest rate hike is increasingly feeding through to household finances, with consumer confidence falling sharply after the hike, reinforcing concerns that the earnings environment for banks may become less favourable."
The raw materials sector fell more than two per cent, despite base and precious metals ticking higher during the session, while a disappointing production update from Fortescue showed iron ore sales falling well short of shipments as negotiations with China's state-backed ore buyer.
BHP shares slumped to $61.19, while Rio Tinto dived 2.9 per cent to $161.97.
Gold stocks were also under pressure, despite the precious metal firming to $US4127 ($A5933) an ounce, roughly 12 per cent short of mid-August's highs, and down a quarter from January's $US5,595 record.
Energy stocks, along with the traditionally defensive utilitites and consumer staples sectors, each gained more than 1.3 per cent as oil prices crept higher as Iranian attacks on tankers and fighting between Saudi forces and Yemeni Houthis escalated.
"A breakthrough in the war would be a major impetus for greater risk appetite in the markets," Capital.com senior market analyst Kyle Rodda said.
"However, negotiations appear to be on pause with the war at an impasse, maintaining significant crosswinds for energy markets."
In company news, Maas shares crumbled by more than a fifth due to its 3 per cent stake in soon-to-be-listed data centre start-up Firmus, amid speculation the widely anticipated listing was under-subscribed and might not happen.
Lovisa shares also tumbled after chief financial officer Chris Lauder announced his departure from the fast fashion jewellery retailer.
The Australian dollar is buying 69.46 US dollars, down from 69.70 US cents on Wednesday at 5pm.
ON THE ASX:
* The S&P/ASX200 fell 66.8 points, or 0.77 per cent, to 8660.9
* The broader All Ordinaries lost 71.4 points, or 0.8 per cent, to 8823.2
One Australian dollar trades for:
* 69.46 US cents, from 69.70 US cents at 5pm AEST on Wednesday
* 109.90 Japanese yen, from 110.38 Japanese yen
* 62.06 euro cents, from 62.07 euro cents
* 52.63 British pence, from 52.61 pence
* 124.15 NZ cents, from 124.37 NZ cents
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