Australian shares extended early losses on Wednesday, driven by a selloff across most sectors, after surprisingly brisk economic growth rekindled interest rate-hike bets, while the widening Middle East conflict heightened inflation concerns. The S&P/ASX 200 slid as much as 2.2% to 8,881.90, the lowest level in three weeks, and heading for its weakest session since February 6 if current losses hold. The benchmark has fallen more than 3% so far this week, heading for its biggest weekly drop since April last year. Data earlier in the day showed that the Australian economy expanded at its fastest annual pace in nearly three years in the December quarter, rekindling inflation concerns and reinforcing bets that interest rates may need to rise to cool the momentum. Markets currently see a 33.4% chance of a quarter-point rate hike at the March 17 meeting, compared with 28% the previous day. The outlook for equity markets has also been dimmed by the widening Middle East conflict that threatens to unleash a wave of global inflation. And though Australia is a net energy exporter, sustained oil rises act as a tax on consumers and businesses. “The (Reserve Bank of Australia) board will stay laser-focused on how the conflict in the Middle East continues to evolve and the risks it brings in terms of a supply shock feeding into higher inflation,” said Tony Sycamore, analyst at IG. In Sydney, financials dropped 1.8% and were set for a fifth straight session of declines. Top lender Commonwealth Bank of Australia slid 1.5%, while the remaining “big four” banks dropped between 1.3% and 2.7%. Miners fell 2.7% after iron ore prices wobbled on Tuesday as investors weighed rising freight costs due to the widening Iran conflict. Mining giants BHP, Rio Tinto and Fortescue dropped between 0.8% and 3.3%. Airline stocks continued to take a beating, with Virgin Australia dropping as much as 3.7% to a one-month low. Larger rival Qantas fell 1.6%. In New Zealand, the benchmark S&P/NZX 50 index fell 0.9% to 13,491.97 and was on track for a third straight session of losses.