Australian Stocks Slump as Oil Shock Fuels Rate Hike Bets

Australia's stock market has taken another hit as concerns over an oil shock and potential rate hike from the Reserve Bank of Australia weigh on investor sentiment.

The S&P/ASX 200 index fell by 1.1% to 8,727, putting it on track for a 3.2% weekly decline - its worst in about six months.

The recent surge in crude prices above $100 has investors worried that higher fuel costs could keep inflation from cooling down quickly, which in turn may lead to another rate hike.

This fear is reflected in the bond market, where Australia's 3-year government yield hit 5.038%, a level not seen since May 2011.