Australian shares closed modestly lower on Monday, marking a fifth straight session of declines, as concerns grew that stalled US-Iran peace negotiations could prolong energy supply disruptions in the Middle East, dampening risk appetite.

The S&P/ASX 200 index fell 0.2% to 8,766.40 points, following a 1.8% drop over the previous week.

The decline came after the US canceled a planned envoy visit to Islamabad for talks with Iran over the weekend, later stating that Tehran had "set many conditions but not enough," reflecting long-standing disagreements over the terms of a potential peace agreement.

Although the stalled talks served as the immediate trigger for the subdued performance of the S&P/ASX 200, the "real pressure stems from a toxic mix of unresolved geopolitical tensions, stubborn inflation, and monetary policy uncertainty, leaving investors without a clear anchor," said Hebe Chen, a market analyst at Vantage Markets.

Since the outbreak of conflict in the Middle East on February 28, the benchmark index has fallen more than 4.5%.

Financial stocks were the biggest drag on Monday, declining 0.5%, with three of the so-called "big four" banks falling between 0.1% and 1%. The energy sub-index dropped 1.9%, despite a nearly 2% rise in crude oil prices, which analysts attributed to profit-taking after the sector surged more than 4% over the previous two sessions. Origin Energy plunged 5% after reporting a 17% decline in third-quarter revenue from its stake in the Australia Pacific LNG project. Mining stocks were the sole gainers, rising 0.7% for their best single-day performance since April 15. Heavyweight Rio Tinto advanced 0.6%, while the gold sub-index jumped 1.6% as a weaker U.S. dollar supported bullion prices.