Australian shares end at 2-month low as Middle East crisis dents sentiment

Australian shares ended 1% lower on Friday, closing at a two-month low, as miners and financials led broad-based selling after reports of escalating tensions in the Middle East prompted investors to dial back on their risk appetite.

The S&P/ASX 200 index XJO closed at 7,567.3 points and recorded its lowest closing level since Feb. 14. The benchmark index lost nearly 3% this week, posting its biggest weekly decline since September 2023.

Multiple reports earlier in the day stated that Israel had attacked Iran, re-igniting fears of an escalation in the Middle East and spurring a sell-off in global markets.

"Even if the unverified reports turn out to be untrue, these headlines are likely to keep investors on edge as we approach Friday's close with the elevated risks of weekend gaps", said Matt Simpson, senior market analyst at City Index.

Lacklustre Australia jobs data and persistently hawkish comments from the U.S. Federal Reserve officials have also weighed on investors' rate-cut expectations over the past week.

Concerns over higher-for-longer interest rates, combined with geopolitical tensions have "made for a particularly bad week for the ASX," Simpson said.

Miners XXMM led losses with a 1.2% drop after iron ore prices retreated.

Mining goliaths BHP BHP and Rio Tinto RIO fell 1% and 1.2%, respectively.

Whitehaven Coal WHC edged 0.1% higher after flagging a potential stake sale in its Blackwater coal mine in Queensland, and recording a rise in quarterly output.

Banks XFJ dropped 1.1%, bringing weekly losses to 3.1%, their biggest weekly drop since mid-March.

The 'Big Four' lenders declined between 1.1% and 1.6%.

Energy companies XEJ dipped 0.1%, with oil and gas giant Woodside Energy WDS losing 0.2% after posting a drop in its quarterly revenue.

Gold stocks XGD gained 0.8% as bullion firmed after concerns over the Middle East conflict prompted safe-haven buying.

New Zealand's benchmark S&P/NZX 50 index NZ50G fell 0.3% to finish the session at 11,796.21 points.