Australian Sharemarket Plunges as Oil Prices Surge Above $US100 a Barrel

The Australian sharemarket dropped to a fresh six-week low on Thursday as crude oil prices surged above $US100 a barrel amid escalating tensions in the US-Iran conflict.

Oil prices rose to almost $US102 a barrel after Iran vowed it was prepared for a more intense war, with President Donald Trump saying prices will remain elevated until after the midterm elections in November.

The S&P/ASX 200 lost 92 points, or 1 per cent, to close at 8819.40, its lowest level since late July, with all 11 sectors finishing in the red.

Miners and banks led the declines, with BHP falling 1.8 per cent, Fortescue 2.4 per cent, and Rio Tinto 2.7 per cent, while energy stocks were mixed, with Woodside Energy dipping 0.7 per cent and Santos edging up 0.1 per cent.

The combination of elevated oil prices and bond yields has left markets sensitive to Friday's US inflation report, which may determine whether the US Federal Reserve raises interest rates next week.