Foreign Affairs Minister Marise Payne is not ruling out banning arms sales to Saudi Arabia over the murder of journalist Jamal Khashoggi.
Australia is still pursuing a military deal with Saudi Arabia, which was flagged just last month, but officials now say it is not a priority.
The Kingdom is under immense international pressure over Khashoggi's murder inside its Istanbul consulate.
Australia has responded by boycotting an investment conference, and is not ruling out imposing sanctions.
Saudi Arabia is also under the global spotlight for its leading role in the war in Yemen.
During a Senate estimates hearing in Canberra on Wednesday, Greens leader Richard Di Natale asked whether Australia would follow Germany's lead and suspend arms sales to Saudi Arabia.
"All options are on the table," Senator Payne told the committee.
Australia is closely monitoring the Yemen conflict and investigation into the murder.
"We absolutely recognise this an extremely serious situation of the highest order of magnitude," Senator Payne said.
"We are not going to prejudge the outcome of the investigation ... all options are on the table in terms of Australia's prospective response."
Last month, Defence Industry Minister Christopher Pyne announced Australia was looking to sign a defence industry deal with Saudi Arabia and the United Arab Emirates.
But during the Senate estimates hearing, senior Defence officers could not offer a time frame on the memorandum of understanding, nor give an indication of how many staff were working on it.
"Discussions are only in the very early stages and they are not a priority at this time," senior Defence official Tom Hamilton told the committee.
Labor senator Penny Wong pressed Mr Hamilton on when the deal became "not a priority", but her question was taken on notice.
Labor senator Alex Gallacher quizzed Defence officials over recent military exports to Saudi Arabia.
Australia approved seven "physical" military exports to the kingdom last year, as well as three "intangible" exports, which officials loosely described as intelligence.
Four physical exports to Saudi Arabia have been approved so far this year.
Defence does not release details of the exports - including their worth or descriptions of the objects - for commercial reasons.
But Senator Gallacher wanted to know whether Australia was aiding Saudi-led air strikes over Yemen.
"Are we sending them things to drop out of the sky?" he asked.
Mr Hamilton said Australian exports were never approved when Defence suspected they could be used to commit human rights atrocities.
