The S&P/ASX200 fell 108.1 points, or 1.26 per cent on Wednesday, to 8,496.6, as the broader All Ordinaries lost 112.5 points, or 1.27 per cent, to 8,717.
Most sectors ended the day in the red, after an overnight spike in bond yields sparked a "sell everything" session on Wall Street overnight, which was echoed by major indices in Asia and Australia.
"Gold came under pressure, silver came under pressure, bitcoin came under pressure, shares came under pressure," Moomoo market strategist Michael McCarthy told AAP.
"In other words, it was a 'sell everything' night, and that tells us that this is not about risk appetites - this is about concern about a deteriorating economic outlook."
Miners and banks weighed heavily, with basic materials down 2.1 per cent and the heavyweight financials sector losing 1.1 per cent.
"That pressure we're seeing on major miners and banks looks to me very much like international investors pulling their funds back in a move to safety," Mr McCarthy said.
BHP, Rio Tinto and Fortescue tumbled as iron ore futures slipped below $US110 a tonne, while gold miners were a sea of red as the precious metal fell to a seven-week low of $US4,472 ($A6,290).
The big four banks all ended the session lower, with ANZ and Westpac, along with investment giant Macquarie, each dropping more than two per cent.
Energy stocks were ultimately flat, as oil prices hung onto their recent gains, while coal miners were mixed and investors continued to unload uranium stocks.
Airlines were again under pressure, with Qantas and Virgin Australia dropping 1.2 per cent and 4.7 per cent, respectively.
The broader industrials sector fell 1.5 per cent as Brambles continued to plunge following Monday's sales guidance downgrade.
Utilities, communications stocks and real estate trusts each slipped 1.6 per cent or more in broad-sector sell-offs.
Despite the ongoing concerns around the Middle East energy shock and price growth surge, investors should be careful about making reactive changes to their portfolios, InvestmentMarkets chief executive Darren Connolly said.
"Periods like this are a reminder that investing is a long‑term exercise," Mr Connolly said.
"Volatility is the price of admission and the fundamentals of diversification, discipline and patience matter most during these times."
In company news, Webjet shares slumped by 11 per cent following news it stands to lose millions of dollars in revenue each year after Virgin Australia flagged plans to launch its own online travel management offering.
James Hardie shares faded by 0.90 per cent to $26.55, after a slip in fourth quarter adjusted earnings overshadowed decent sales growth in the three quarters to March.
The Australian dollar is buying 71.02 US cents, down from 71.48 US cents on Tuesday at 5pm.
ON THE ASX:
* The S&P/ASX200 fell 108.1 points, or 1.26 per cent, to 8,496.6
* The broader All Ordinaries gained 112.5 points, or 1.27 per cent, to 8,717
One Australian dollar trades for:
* 71.02 US cents, from 71.48 US cents at 5pm AEST on Tuesday
* 112.96 Japanese yen, from 113.47 Japanese yen
* 61.27 euro cents, from 61.30 euro cents
* 53.07 British pence, from 53.24 British pence
* 121.78 NZ cents, from 121.80 NZ cents
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