The worsening conflict between Israel and Iran pushed the Australian share market down to its lowest weekly close since December due to rising oil prices.
The ASX 200 index fell 2.6% for the week to reach its lowest weekly close since December, falling a further 11.9 points, or 0.1% to 8617.1 points on Friday.
Overall, the market is now down 6.3% since the Iran conflict started on February 28, erasing more than $190 billion in market value.
China cracks down on BHP
As well as the Middle East, China’s actions in widening a ban on BHP iron ore imports saw shares in BHP (ASX: BHP) fell by 2.3% to $49.80.
Fortescue shares (ASX: FMG) added 4.1% to $20.48 as analysts surmised that the third force in iron ore would benefit from further action against its bigger Pilbara neighbour BHP.
Investors also lost more faith in gold producer Northern Star (ASX: NST) with its shares losing a whopping 18.8% or $5.02 to $21.75 after the company warned that it would struggle to hit the bottom end of its 2025-26 production guidance.
Weaker milling at the Kalgoorlie Super Pit and reduced output at Jundee were blamed for the failure to meet even the most pessimistic predictions.
Also struggling were shares in mineral explorer Syrah Resources (ASX: SYR) which fell a precipitous 29.2% to 17¢ after the US International Trade Commission rejected imposing tariffs on Chinese graphite anode materials.
Banks up on rising interest rates
Unsurprisingly, the falls in materials offset gains in six of the 11 sectors, with the banking sector buoyed by expectations that net interest margins would be boosted should official interest rates rise next Tuesday as predicted.
National Australia Bank shares (ASX: NAB) were the strongest of the banks, rising 1.5% to $47.11, while shares in sector leader Commonwealth Bank (ASX: CBA) rose 1.3% to $173.76.
With oil now trading above US$100 a barrel despite the relaxation of US restrictions on Russian oil, energy shares were broadly higher as hopes of a quick end to Iran’s closing of the Strait of Hormuz faded.
Santos shares (ASX: STO) were up 0.5% to $7.53 and Ampol shares (ASX: ALD) jumped 1.9% to $30.85, while Woodside Energy shares (ASX: WDS) were flat at $31.04.
Coal prices were also riding high during the week, with shares in Yancoal (ASX: YAL) up another 4.5% to $8.06, marking an impressive rise of nearly 20% for the week.
Drone stocks buzz higher
The conflict has positively impacted some stocks, with shares in counter-drone company Electro Optic Systems (ASX: EOS) jumping 18.4% to hit a record $11.74 after announcing a US$42 million contract for a Middle East customer as the Iran conflict wears on.
DroneShield shares (ASX: DRO) gained 6.4% to $4.17 after being swept up in the defence enthusiasm.
Individual company news was also driving share prices with shares in affordable accommodation group Lifestyle Communities (ASX: LIC) up an impressive 17.2% to $5.31 following the purchase of 11.9 million shares by US-based prefab giant Hometown.
Cancer treatment fails
Shares in biotech minnow Immutep (ASX: IMM) plunged 88.6% to 4.5¢ after news that its lead drug candidate had failed as a lung cancer treatment.
Airline Qantas (ASX: QAN) shares fell 0.7% to $8.61 after it revealed it had reached a $105 million settlement in the class action over flight credits issued during COVID-19.
Shares in Dalrymple Bay Infrastructure (ASX: DBI) rose 6% to $4.93 after it priced its first $350 million five-year fixed-rate bond in the Australian Medium-Term Note market.
The week ahead
The coming week is a massive one for central banks around the world as the sudden burst in inflation caused by rocketing oil prices causes plenty of alarm.
Of course, the biggest of all for us here in Australia will be the announcement by the Reserve Bank of Australia about its decision on official interest rates.
Most economists have now concluded that the RBA will decide to raise rates by 25 basis points on Tuesday which would see the cash rate rise to 4.1%.
Many have also pencilled in another rate rise in May as the RBA confronts unexpectedly high inflation, rising petrol and diesel prices and a tight labour market.
Other economic data to be released includes the Westpac Melbourne Institute Leading Index, which aims to signal economic activity 3 to 9 months ahead, and employment figures on Thursday.
The US Federal Reserve is also meeting early Thursday Australian time, and it is widely expected to leave interest rates steady, which in the current environment is as good as a cut.
Interest rate decisions are also set to be made by central banks in Canada, Japan, Europe, England, Switzerland and China so it will be interesting to see if there is some sort of global consensus on rates.
