The Australian sharemarket has tumbled more than 1% as fears of a widening Middle East war roiled global markets and sent the oil price soaring.

The S&P/ASX 200 fell 121.80 points, or 1.3% to 8955.50 at 10.20am AEDT, with all 11 sectors weaker as investors pivot away from risk assets.

It comes after Wall Street tumbled by as much as 2% overnight as fears that a prolonged conflict in the Middle East could drive up inflation, resulting in traders paring back expectations of further rate relief in the near term in the US.

“Markets are recognising the Iran conflict could be drawn out and more disruptive to the world economy than initially thought,” Moomoo Australia deadling manager Paco Chew said.

The energy sector was mixed as Woodside rose 0.2% and Ampol 1.4%, as oil rose 5.4% to $US81.95 a barrell overnight. The US said it would look to insure and escort tankers through the Strait of Hormuz to ease fears. Santos dropped 1.2%, while Whitehaven added 0.4%.

Materials dived almost 4% after gold dropped as much as 6% overnight before stabilising around $US5106 an ounce. Newmont tumbled 7.3%, Northern Star 5.9% and Evolution Mining by 5.9%.

In company news, Virgin Australia fell 1.6% as a fresh disclosure with the market operator showed that Qatar Airways has shrunk its stake in the airline from 69.79% to 67.74%.

Endeavour Group dropped 2.4% as its interim divieend of 10.8¢ was less than market expectation after net profit fell 17.1% to $298 million.

Treasury Wine Estates rose 0.2% as it announced chief financial and strategy officer Stuart Boxer would retire effective September 30.

AUB slid 0.6% as it completed its share purchase plan, raising approximately $10.6 million following its $400 million institutional placement announced in January.