Updates to close
Miners led losses, posting weakest day in nearly a month
Banks edge 0.1% lower, while CBA gains 0.3%
Energy stocks log highest close in over 1-1/2 years
By Kumar Tanishk
March 3 (Reuters) - Australian shares marked their weakest session in over two weeks on Tuesday, as the escalating air war in the Middle East tempered risk sentiment and stoked inflation concerns.
The S&P/ASX 200 index .AXJO closed down 1.3% at 9,077.30, its worst day since February 13. It ended flat on Monday.
Israel widened its offensive with fresh strikes on Iran and Hezbollah, while Tehran fired missiles and drones at Israel, Gulf states and even a British air base in Cyprus, raising investor fears over a protracted conflict.
"With reporting season out the way in Australia, the market is focused on these (Middle East) tensions and the potential ramifications of a prolonged disruption," said Craig Sidney, senior investment adviser at Shaw and Partners.
"The longer the Middle East situation plays out, the stronger the oil price should remain, causing a potential increase in inflation."
Back home, Reserve Bank of Australia $(RBA)$ governor warned that a rate hike remained on the table for this month's meeting if the board judged inflation expectations were drifting off anchor.
Sidney said the RBA may refrain from immediate rate increases given the uncertain situation despite short‑term inflation pressures.
On the bourse, miners .AXMM led the decline, sliding 3.1% for their weakest session in nearly a month, while gold stocks .AXGD dropped 3%. Sidney cited profit‑taking as the chief driver for these moves.
Heavyweights BHP BHP.AX and Northern Star Resources NST.AX retreated 2.6% and 3.2%, respectively.
Banks .AXFJ closed 0.1% lower, while top lender Commonwealth Bank of Australia CBA.AX rose 0.3%
Meanwhile, energy firms .AXEJ rose 1.4% to their highest close in over 18 months as oil prices surged. O/R
Investors are now looking ahead to the country’s gross domestic product data due on Wednesday.
New Zealand's benchmark S&P/NZX 50 index .NZ50 ended 0.3% lower at 13,620.21 points.
(Reporting by Kumar Tanishk in Bengaluru; Editing by Harikrishnan Nair)
((Tanishk.Kumar@thomsonreuters.com; X: @thatstanishk http://www.x.com/thatstanishk;))