Market participants remain wary about what Israel may do next following a barrage of Iranian drone and missile attacks. Also investors were awaiting an Australian labour force survey and the quarterly inflation reading for clues on the Reserve Bank of Australia's (RBA) future monetary policy.

At closing bell, the benchmark S&P/ASX200 index declined by 140.03 points, or 1.81%, to 7,612.49. The broader All Ordinaries index dropped 147.05 points, or 1.84%, to 7,862.33.

All 11 sectors ended lower along with the S&P/ASX 200 Index. Consumer discrtetionary was the bottom performing sector, falling 2.39%, followed by utilities (down 2.15%), materials (down 2.03%), A-REIT (down 2%), financial (down 1.92%), and energy (down 1.78%) sectors.

Shares of materials and resources were lower, with BHP Group, Rio Tinto, and Fortescue shedding between 0.8% and 1.4%. Gold stocks fell, with Northern Star Resources and Evolution Mining down 0.2% and 0.3%, respectively.

Banks and financials were also lower, with "Big Four" banks falling between 0.6% and 1.1%. Commonwealth Bank of Australia, the country's largest lender, dropped 1.1%.

Energy stocks were lower after crude oil prices fell overnight. Woodside Energy and Santos were down 1.4% and 1%, respectively.

Technology stocks fell on concern over higher borrowing costs amid rising long-term interest rates in the United States, with Block and Xero shedding 4.5% and 0.6%, respectively.