Australian equity futures reversed early morning gains after US President Donald Trump threatened to "shower" Iran with missiles, a move that coincided with Tehran's announcement that it was closing the Strait of Hormuz indefinitely.
The escalation has immediately injected uncertainty into global risk assets, overshadowing the initial optimism that had pointed to a 0.4% rise for the ASX 200 at the open.
The threat to the Strait of Hormuz, which handles roughly a fifth of the world's oil consumption, represents a significant escalation in the ongoing conflict.
Market participants are now bracing for potential disruptions to energy supply chains, which could drive up oil prices and weigh heavily on inflation-sensitive sectors.
The sudden shift in geopolitical posture has forced traders to reassess risk exposure ahead of the trading day.
This development follows a period of heightened volatility in global equities as military tensions between the United States and Iran have intensified.