Oct 19 (Reuters) - Australian shares fell more than 1% on Thursday, tracking sharp declines on Wall Street as the escalating Middle East conflict triggered a broad sell-off and stoked oil supply concerns.

The S&P/ASX 200 index fell 1.4% to 6,978.7 by 2350 GMT, with most major sectors trading in negative territory. The benchmark index gained 0.3% on Wednesday.

Australia's employment rose less than expected in September, following a blowout result the month before, but the jobless rate still ticked down in a sign the labour market remained drum tight.

On Wednesday, the Australian central bank governor said the domestic economy was in a "challenging" situation with consumption slowing but inflation still elevated, and monetary policy was on a narrow path to balance these forces.

Heavyweight miners led the losses with a 1.6% drop, after iron ore retreated on Wednesday as lower-than-expected Chinese steel output and a protracted property crisis fuelled demand concerns.

Top miners Rio Tinto and Fortescue fell 2.2% and 1.1%, respectively.

Financials declined 1.2%, with the "big four" banks down between 1.2% and 1.5%.

Energy stocks lost 0.6%. Shares of Santos were down 0.3% even after the country's No. 2 independent gas producer reported a 7.5% sequential rise in quarterly revenue, helped by increased crude oil volumes and higher prices.

Gold stocks gained 0.3% after bullion prices rose to a more than two-month high on Wednesday as the escalating Middle East conflict sent investors flocking towards the safe-haven metal.

Tech stocks dropped 1.2%. Xero and Computershare fell 1.4% and 1.3%, respectively.

In corporate news, Qantas Airways will drop its $387 million plan to buy out charter flight operator Alliance Aviation Services. Qantas shares fell as much as 3.7%, hitting their lowest since August 2022.

In New Zealand, the benchmark S&P/NZX 50 index fell 0.8% to 11,136.56.

(Reporting by Ayushman Ojha in Bengaluru; Editing by Subhranshu Sahu)