The S&P/ASX 200 dropped nearly 2% to close at 8,901 on Wednesday, marking a three-week low, as worries about the inflationary fallout from the Middle East conflict overshadowed stronger-than-expected domestic GDP data. The economy grew 0.8% in Q4 2025, with annual growth accelerating to 2.6%, the fastest pace in almost three years and above forecasts. Still, escalating tensions tied to the Iran conflict unsettled global markets and dampened risk appetite. While the solid growth print underscored economic resilience, it also reinforced expectations that interest rates could stay higher for longer. Gold stocks led the retreat, tumbling 3.9% and dragging the broader mining sector down 3%. Airline shares remained under pressure, with Virgin Australia falling 2.9% to a one-month low and rival Qantas down 2.7%. Heavyweight financials also extended declines, while energy stocks cooled after three straight sessions of gains.