ASX tracks worst day for 11 months as crude prices rocket 25%
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More news: The Australian sharemarket tracked its worst day for 11 months as ongoing disruption in the Strait of Hormuz due to escalating conflict in the Middle East saw oil prices surge more than 25% to around USD115 a barrel.
The benchmark ASX 200 index was down 4.1% to 8,484.5 at 1:30pm AEDT.
Energy (+1.1%) was the only sector in positive territory as oil and coal companies rallied on the supply disruptions. Oil producers Karoon Energy (+8%), Santos (+3.2%), Beach Energy (+2%) and Woodside Energy (+0.9%) were all higher, as were coal miners Yancoal (+10.3%), New Hope (+3.3%) and Whitehaven Coal (+1.3%).
The materials segment slumped 6.1%, with the sector’s largest companies BHP (-6.3%), Rio Tinto (-4.7%) and Fortescue (-3.6%) taking heavy hits. Gold mining majors Evolution Mining (-6.9%), Northern Star (-6.5%) and Newmont (-3.5%) also dropped.
Technology (-5.5%), industrials (-4.5%) and real estate (-4.4%) saw the next biggest losses.
Betashares chief economist David Bassanese believes the longer the conflict continues, the larger the upside risk to oil prices, and the greater pressure on US President Donald Trump to try and strike a deal with the Iranian regime.
“I suspect the resilience of the Iranian regime in the face of heavy attacks has surprised the US, but whether it can continue to hold out remains to be seen,” Bassanese said.
“The longer it can, the greater the pressure on Trump to “do a Greenland’ — claim victory and walk away.”
RBC Capital Markets’ head of global commodity strategy Helima Croft said the “endgame for the Iran war remains elusive” with “no indications that either side is backing down at this stage”.
“Oil’s furious rise continues as the conflict in the Middle East shows no signs of abating,” said Croft.
“Faced with the worst oil supply shock since the 1970s, all eyes will be on Washington’s response mechanisms as oil breaches the $100/bbl mark.
“To-date, neither White House policy prescriptions nor upbeat television soundbites have alleviated acute market anxiety about the shipping standstill and cascading shut-ins across the region.”
ASX plunges at the open; on track to wipe out more than $90 billion
More news: Australian shares opened sharply lower, weighed down by the tech, mining and real estate sectors amid ongoing escalation in the Middle East that heightened fears on inflation.
The benchmark ASX 200 was down by 267.1 points, or 3.02%, to 8,583 at 10:24am AEDT, with $90 billion in paper value wiped from the exchange. Ten of the 11 sectors opened in the red.
Miners (-4.12%) was the worst performing sector at the open, dragged lower by BHP (-4.43%), Fortescue (-3.17%), Rio Tinto (-3.13%) and James Hardie (-7.53%).
Siteminder (-7.88%), Silex Systems (-7.70%) and Capstone Copper (-7.02%) all tumbled in early trade and were among the worst performers across the ASX 200. Catapult Sports (-7.89%) slumped after being kicked from the ASX 200 in the quarterly rebalance.
Energy (+2.44%) was the only sector that opened in the green, supported by a lift in Woodside Energy (+3.84%), Yancoal (+5.06%) and Whitehaven Coal (+2.71%) on surging oil prices that saw it climb above USD100 a barrel as more major producers curbed production.
Karoon Energy (+8.53%), Santos (+3.62%) and New Hope (+3.17%) were also among the top performers in early trading.
Australian shares to slump at the open as oil prices surge
The news: Australian shares are set to open sharply lower after Wall Street’s three main indices closed down on Friday amid signs of a sudden setback in the US labour market and a 12% surge in oil prices as conflict in the Middle East escalated.
The numbers: Updated at 7:43am AEDT:
- ASX futures: down 156 points to 8,684.
- Wall Street: Dow Jones down 0.95%, S&P 500 down 1.33% and the Nasdaq down 1.59%.
- Europe: CAC 40 down 0.65%, DAX down 0.94% and FTSE 100 down 1.24%.
- Spot gold: up 1.47% to USD5,158 per ounce.
- Oil prices: Brent up 8.52% to USD92.69/bbl and US WTI up 12.21% to USD90.90/bbl.
- AUD: up 0.30% at 70.28 US cents.
- Bitcoin: up 0.12% to USD67,349.
The context: All three major US indices closed lower on Friday. The Dow Jones fell 453 points, leaving the blue-chip index down 3% for the week in its steepest decline since April. The S&P 500 dropped 1.3% to a record weekly loss of 2%, while Nasdaq slid 1.6%, ending the week 1.2% lower.
The US Bureau of Labor Statistics showed the economy lost 92,000 jobs in February, compared with a gain of 126,000 in January and well below economists’ expectation for an increase of 50,000 jobs, according to economists polled by The Wall Street Journal. The unemployment rate rose to 4.4%.
Oil prices surged following the US-Israeli military attack in Iran that disrupted shipping through the Strait of Hormuz. US crude oil futures jumped more than 12% on Friday, to above USD90 per barrel, Brent crude rose about 8.5% to USD92 per barrel.
A cooling labour market alongside rising energy costs could raise the risk of stagflation, WSJ said. The central bank is expected to keep rates on hold at its March meeting, while traders have scaled back their expectations for rate cuts this year.
Locally, the Economic Society of Australia is scheduled to host an International Women’s Day panel at 12:00pm today.
