The benchmark S&P/ASX200 index finished Monday down 33.7 points, or 0.39 per cent, to 8,583.4, while the broader All Ordinaries dropped 45.7 points, or 0.52 per cent, to 8,793.4.
"Markets are coming to terms with the stark reality that there may be no easy resolution to the war in Iran, and that the impact on global energy prices could last longer than initially expected," said Justin Lin, investment strategist at Global X ETFs Australia.
Ongoing stress in private credit markets is also starting to weigh on investor sentiment and share markets, Mr Lin added.
The Reserve Bank of Australia is expected to become the only central bank amongst the eight global banks making monetary policy decisions this week to raise rates.
All four of Australia's big banks expect the RBA to hike the cash rate to 3.85 per cent on Tuesday.
The US Federal Reserve and the central banks of Japan, China, England, the European Union, Switzerland and Sweden will all announce their decisions on interest rates over Wednesday and Thursday, local time.
Five of the ASX's 11 sectors finished lower on Monday, and six closed higher.
The heavyweight materials sector was the biggest mover, dropping 2.2 per cent.
Goldminers were in the red as the yellow metal fell to a three-and-a-half-week low of $5,020 an ounce after a better-than-expected US jobs report over the weekend further pared back hopes for quick US rate cuts.
Northern Star lost 5.4 per cent, Evolution slipped 3.0 per cent and Newmont subtracted 4.2 per cent.
Elsewhere in the sector, Fortescue dropped 3.9 per cent to $19.69, Rio Tinto diminished 2.0 per cent to $154.70 and BHP dipped 1.2 per cent to $49.19
Lynas climbed 1.4 per cent after the rare earth miner signed an offtake agreement with the US Department of War, while Orica dipped 1.7 per cent after the explosives maker settled a US lawsuit over a contract dispute.
Orica will pay $US169.5 million ($A242.5 million) to former supplier CF Industries, with neither party admitting wrongdoing.
In the financial sector, the big four banks were mixed, with CBA gaining 1.0 per cent to $175.53 and ANZ rising 0.7 per cent to $37.45, while Westpac dipped 0.2 per cent to $40.92 and NAB slipped 0.1 per cent to $47.06.
Perpetual Limited gained 1.8 per cent to $16.53 after the investment manager agreed to sell its sprawling wealth management business to US-based private equity firm Bain Capital for at least $US500 million.
"This is a pivotal step in our strategy to simplify and transform Perpetual," said chief executive and managing director Bernard Reilly, who explained the transaction would leave Perpetual with two core businesses, asset management and corporate trustee services.
In the energy sector, Woodside gained 1.9 per cent to $31.63 and Santos climbed 2.1 per cent to $7.69 as Brent crude changed hands at a six-day high of nearly $US105 a barrel amid the continued Middle East hostilities.
But Whitehaven Coal slid 5.4 per cent and uranium developer Deep Yellow lost 11.3 per cent.
In the consumer discretionary sector, Guzman y Gomez gained 3.2 per cent to $18.63 as the Mexican-themed restaurant chain said that co-CEO Hilton Brett would reduce his workload in preparation for a kidney transplant later in the year.
The Australian dollar was changing hands for 70.15 US cents, from 70.63 US cents at 5pm on Friday.
ON THE ASX:
* The S&P/ASX200 fell 33.7 points, or 0.39 per cent, to 8,583.4
* The broader All Ordinaries lost 45.7 points, or 0.52 per cent, to 8,793.4
One Australian dollar trades for:
* 70.15 US cents, from 70.63 US cents at 5pm AEDT on Friday
* 111.78 Japanese yen, from 112.60 Japanese yen
* 61.37 euro cents, from 61.41 euro cents
* 52.96 British pence, from 52.98 British pence
* 120.80 NZ cents, from 121.17 NZ cents
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