The S&P/ASX 200 index declined 0.8 percent on Thursday, closing at 8,660.9 points as weakness in the materials sector weighed on the market. The performance mirrored losses on Wall Street amid ongoing geopolitical tensions linked to the US-Iran conflict, with the index on course for its worst monthly decline since the war’s outbreak.

The downturn in materials shares coincided with a 2 percent increase in Brent crude oil prices during Asian trading hours. Financial and industrial sectors also posted notable losses, while consumer staples, energy, and utilities were among six sectors that recorded modest gains, rising between 1.3 and 1.4 percent.

Among significant decliners, jewellery retailer Lovisa’s shares dropped 9.1 percent following the resignation of its chief financial officer. Meanwhile, Israel-based chip manufacturer Weebit Nano’s stock plunged 11.5 percent to a 12-month low, despite the company’s recent dismissal of concerns over its financial stability.

Cameron McCormack, senior portfolio manager at VanEck, highlighted that the Australian sharemarket was facing considerable headwinds, with forward earnings growth estimated at 8 percent—well below the global average of 17 percent. He cautioned that ongoing interest rate hikes by the Reserve Bank of Australia (RBA) and rising 10-year government bond yields, currently at their highest since 2011, could exert further downward pressure on equities.

Reflecting on policy tensions, Geoff Crittenden, CEO of Weid Australia, criticized the central bank’s stance on productivity, arguing that increasing capital costs undermined businesses’ ability to invest in new technology and skills. “You cannot demand that businesses step up to the plate while you’re taking the bat out of their hands,” he said.

In contrast to broader market weakness, small-cap miner Alvo Minerals experienced a dramatic 210 percent surge to 6.2 cents following promising rare earth drilling results in Brazil. The Small Ordinaries index fell 1.2 percent overall, although ASX Ltd shares rallied 3.8 percent after UBS research cited positive sentiment, buoyed by expectations of upcoming strong earnings growth.

Heavyweights BHP and Rio Tinto declined 2 percent and 2.9 percent respectively, as concerns about the global materials sector weighed on investor appetite. Meanwhile, yields on US government bonds stabilized, though European bond markets saw increases, with French, Italian, and British yields climbing.

Gold prices dropped sharply, falling as much as 2.3 percent to a two-month intraday low.

On the corporate outlook, Citi placed a 90-day “upside catalyst watch” on software firm Xero, anticipating robust revenue growth in its forthcoming interim results. UBS also noted that the Small Ordinaries index remained attractively valued relative to larger-cap stocks, trading near its deepest discount since the global financial crisis, strengthening the medium-term investment case for smaller Australian companies.