The spreading war in the Middle East has significantly impacted the Australian share market, leading to a 3.8% decline over the past week amidst significant volatility in global energy markets.
The fall is the largest weekly slump of the year and the most significant since last April when US President Trump initially revealed his radical tariff plans.
This time around the uncertainty is perhaps even greater as more countries become involved in the Iran conflict and markets anticipate a fresh wave of inflation due to rocketing oil prices.
Australians are particularly affected by the closure of airports in the Gulf states, with many passengers stranded and uncertainty over the duration of transport disruptions; analysts are now suggesting the conflict could last for months rather than weeks as an unstable Iran reacts against its neighbours.
February gains lost
On Friday, the ASX 200 index fell 1%, culminating in a 3.8% loss for the week – its largest decline since April when the Trump administration introduced wide-ranging tariffs.
On Friday it lost 89.30 points, or 1% to 8851 points, in the process fully wiping out February’s 3.7% gain.
Markets are now pricing in a shock from rising oil prices and supply uncertainty, which has significantly reduced the likelihood of further official US interest rate cuts, leading to expectations of two additional Australian interest rate increases this year.
The outlook for economic growth has also weakened, adding to the overall downward pressure on shares.
Energy stocks on the rise but gold slumps
Amid volatile trading in energy markets, as oil prices fell 1.1% to US$84.49 a barrel, Australian energy stocks rose, with Woodside Energy (ASX: WDS) shares up 1% to $30.75, Santos shares (ASX: STO) up 1.9% to $7.46, and Viva Energy shares (ASX: VEO) rising 1.5% to $2.10.
The rise in Santos shares happened as Santos chief executive Kevin Gallagher sold down $5.6 million worth of shares.
Shares in gold miners slumped sharply as the price of the precious metal fell for the first week in more than a month.
The allure of the US dollar during a crisis caused much of the rotation out of gold. Shares in Catalyst Metals (ASX: CYL) fell 11.3% to $7.04 while Westgold Resources shares (ASX: WGX) fell 8.2% to $6.63 and Newmont shares (ASX: NEM) dropped 2.7% to $165.14.
Big miners crunched
Iron ore prices have been holding above US$100 a tonne, but that did not prevent a slide in the share prices of the big miners after China’s state-backed buyer urged traders to stop buying new BHP cargoes, finding they had breached existing purchase restrictions. BHP shares (ASX: BHP) dropped 4.2% to $52.81, Rio Tinto shares (ASX: RIO) fell 3.6% to $158.67 and Fortescue shares (ASX: FMG) fell 0.7% to $19.25.
Tech shares recover
Technology shares were the strongest sector, rising 4.6%, with WiseTech Global (ASX: WTC) shares jumping 10.8% to $52.72, and Xero shares (ASX: XRO) rising 4.5% to $87.63.
Despite the global turmoil, individual stocks were moving on more localised news, with the addition of the billionaire Lowy family to the Magellan Financial (ASX: MFG) shareholder list with a crucial 5.1% stake, sending its shares up 9.3% to $11.55 following Magellan announcing a merger with Barrenjoey.
News that SkyCity Entertainment (ASX: SKC) faced potential class action proceedings over its online casino operations in New Zealand sent its shares down 4.2% to 69¢.
SkyCity has denied any liability and will actively defend the proceedings. Uranium miner Deep Yellow (ASX: DYL) shares also dropped 11.8% to $2.17 after it reported a half-year loss of $7.78 million, widening from a $2.47 million drop a year ago.
The week ahead
While the war will continue to be the major factor in moving the market in the coming week, there are also a swathe of more pedestrian economic statistics released.
Much of that data will be from the US, with existing home sales figures, inflation data, fourth quarter GDP growth, personal income and spending, durable goods and consumer sentiment.
While the US earnings season is winding down, the release of Oracle’s profit on Tuesday will be a big test given the company’s aggressive push to compete with major cloud providers in the AI space. Oracle may also shed some light on its plans to spend US$50 billion on AI infrastructure this year.
Here in Australia, there will be releases on consumer and business confidence while a forest of both large and small companies will go ex-dividend, testing the resilience of their share prices.
