Markets around the world are bracing for a possible US military strike against Syria, as fears rise over the Assad regime's alleged use of chemical weapons.
More than $15 billion was knocked off Australian shares as US political leaders upped the ante against Syria. The benchmark S&P/ASX 200 Index suffered its biggest one-day fall in three weeks, dropping 54 points, or 1 per cent, to 5087.2 points, while the broader All Ordinaries Index lost 52.8 points, or 1 per cent, to 5078 points.
The falls followed investors across the globe fleeing to safety, ditching equities for gold. The precious metal shot up to its highest level since May, strengthening 0.6 per cent to $US1428.45 an ounce.
Oil, meanwhile, rocketed to an 18-month high amid fears the tensions in Syria could spill over to its energy-rich neighbours and hinder crude supply in the Middle East, which pumps a third of the world's oil. The US benchmark WTI crude surged to $US109.32.
Asian stocks were the worst hit as investors dumped assets traditionally considered risky.
Japan led the plunge in the region, with the key Nikkei 225 Index tumbling 1.5 per cent.
The Dow Jones Industrial Average on Tuesday fell 1.14 per cent to 14,775.90 as the West moved closer to a strike against Syria in response to its alleged use of chemical weapons against civilians.
The regional turmoil was affecting the Australian dollar, which late on Wednesday was trading at US89.14¢, down half a US cent during the session. At the same time, India's currency, already under pressure, was hit with another selloff, falling more than 3 per cent in morning trade.
Westpac senior currency strategist Sean Callow said the Australian dollar was suffering collateral damage from regional turmoil, including huge losses for a number of emerging market currencies.
Patersons Securities economist Tony Farnham said comments from US political leaders regarding Syria had done little to calm markets.
Warnings from the US, France and Britain that Damascus would be held accountable for the August 21 attack sparked market worries of a possible broader conflict.
The fighting words pushed the Australian dollar to a three-week low of US89.27¢.
However, Mr Farnham believed the volatility stemming from Syria would be short-lived.
"It will come and it will go and, eventually, markets factor it in," he said.
Locally, the positive stories were still being rewarded, with Woolworths an example. The supermarket chain's underlying net profit climbed 8 per cent last financial year, and its chief executive thinks it could hit double-digit growth in the coming year. Woolworths' shares subsequently shot up 2 per cent to $34.59.
Investors also rewarded AGL Energy, which firmed almost to a month high - up 4.9 per cent to $15.08 - after the company reported its full-year revenue up 30.3 per cent to $9.72 billion.
Elsewhere, dark clouds gathered on the horizon.
A dip in base metal prices, particularly copper, hurt mining stocks, with index heavyweights BHP Billiton and Rio Tinto shedding 2.3 per cent to $34.80 and 2.6 per cent to $58.16 respectively.
Online travel company Wotif plummeted 6.4 per cent to $4.71 after it posted a 12 per cent fall in net profit to $51 million, attributing the decline to its underperforming business in Asia.
Banks and insurers were also hit hard, with the financial sector down 1.2 per cent.