Australian Shares Plummet on Rising Oil Prices and Inflation Concerns

Australian shares plummeted on Tuesday, marking their largest decline in over three months. The S&P/ASX 200 index dropped 1% to a new low of 8,920.80 points, its lowest closing level since July 28.

The slump was led by weakness in financials and mining stocks, with oil prices rising after Iran threatened to retaliate against any new US attacks by targeting energy infrastructure across the Gulf.

Rising oil prices have added to inflation concerns, causing investors to become increasingly risk-averse. Kai Chen, director at MPC Markets, noted that 'consumers are clearly weakening, but inflation remains elevated enough that the RBA may have limited room to provide relief.'

The Reserve Bank of Australia (RBA) assistant governor Sarah Hunter downplayed concerns about a potential recession, stating the board aims to cool the economy through higher rates.