The share market has fallen to a two-month low as escalating violence in Iraq rattles investors.

US President Barack Obama has said he’s considering all options to halt the march of Islamic militants toward Baghdad, after they captured a town to the north of the capital.

The escalating violence has hurt global risk sentiment and sparked concerns the conflict could disrupt Middle East oil supplies, causing US markets to slump overnight and US oil prices to spike to a nine-month high, Commsec market analyst Steven Daghlian said.

“Any sort of negative news of potential military action is never a good thing for markets, in particular for the riskier assets like the miners and commodities,” Mr Daghlian said.

“The mining sector continues to be one of the biggest drags, partly because of a sharp fall in iron ore prices overnight too.”

Among the iron ore miners, Fortescue Metals had slumped 19.5 cents to $4.135, Atlas Iron was down two cents to 59.5 cents and Mt Gibson had dropped 4.5 cents to 66.5 cents.

Some investors have headed for the security of gold, with Newcrest Mining up 20 cents to $9.91 and Resolute Mining 3.5 cents higher at 63.5 cents.

Energy stocks have lifted, the only other sector up apart from gold, including Santos which had risen 12 cents to $14.63.

The major banks were down: National Australia Bank had fallen 26.5 cents to $33.065, Commonwealth Bank was minus 47 cents to $81.41, ANZ had shed 13 cents to $33.70 and Westpac was 40.5 cents lower at $34.175.

KEY FACTS

* At 1200 AEST on Friday, the benchmark S&P/ASX200 index was down 45.4 points, or 0.84 per cent, to 5,383.5.

* The broader All Ordinaries index was down 44.4 points, or 0.82 per cent, to 5,363.5.

* The June share price index futures contract was 46 points lower at 5,385, with 30,526 contracts traded.

* National turnover was 749 million securities worth $2 billion.