The Australian sharemarket endured a sharp sell-off on Monday, closing down 252 points to 8535, erasing nearly $120 billion in market capitalisation as escalating tensions in the Middle East rattled investors. The S&P/ASX 200 Index recorded its largest single-day loss since April of last year, mirroring declines across the Asia-Pacific region.
The downturn was triggered by a surge in oil prices, nearing $US120 a barrel before settling at $US116.05 – a 23.4 per cent increase and the highest level since the Russia-Ukraine conflict in 2022. Concerns are mounting that the conflict could reignite inflationary pressures and prompt further interest rate hikes from central banks.
Disruptions to the Strait of Hormuz, a vital shipping lane for approximately 20 per cent of the world’s crude oil, have exacerbated market anxieties. The situation is compounded by uncertainty surrounding the succession of Iran’s supreme leader following reports of his death.
Energy stocks were among the few to buck the trend, with Woodside, Karoon Energy, Santos, and Beach Energy all posting gains. Coal miners also saw increases as markets anticipated a shift towards alternative energy sources. Santos and Beach Energy are Australian energy and oil and gas exploration companies, respectively.
Though, materials, financials, and interest-rate-sensitive sectors bore the brunt of the losses. Major banks, alongside mining giants BHP, Rio Tinto, and Fortescue, all experienced significant declines. BHP fell over 5 per cent during the session.
Elsewhere in corporate news, Domino’s Pizza Enterprises saw a slight dip despite its chairman increasing his stake in the company. Dyno Nobel tumbled after selling its Phosphate Hill fertiliser business to Mayfair Australia, whereas Pro Medicus slid despite securing two five-year contract renewals in the US.
The Australian sharemarket has now lost a total of $140 billion this week, marking its worst weekly performance since May 2022, when a surprise rate hike triggered a similar sell-off. As of Friday afternoon, the market had lost 4.1 per cent of its value. AMP Chief Economist Shane Oliver noted the initial market reaction to the conflict was “muted”, but concerns are growing about the potential for a prolonged war.
The ASX 200 was 1.4 per cent down on Friday afternoon with the Iran war entering its sixth day and Brent crude around $84 a barrel. Iran has declared the Strait of Hormuz closed, impacting an estimated 200 ships, including oil and liquefied natural gas tankers.
The broader market decline saw the S&P 500 fall around 2% and London’s FTSE copping the worst of it globally, down over 5% for the week.
