Australian shares are set for a sharply weaker open, with ASX 200 futures down 124 points, or 1.4%, to 8910, as escalating tensions in the Middle East rattle global markets and drive a fresh spike in oil prices.
The risk-off tone follows a broad sell-off across Wall Street and Europe, with investors reassessing inflation, rate expectations and global trade risks.
The S&P/ASX 200 fell 1.3%, or 123.60 points, to 9077.30 on Tuesday, retreating from Monday’s record close of 9202.90. Ten of the 11 sectors finished in negative territory as investors locked in gains after a strong February reporting season.
“Investors decided to batten down the hatches and lock in profits after a fantastic February reporting season and a good run higher,” IG market analyst Tony Sycamore said.
Oil remained the focal point, climbing a further 2.6% in Asian trade to US$79.76 a barrel as Iran threatened to close the Strait of Hormuz, a critical global oil chokepoint. The move reignited inflation concerns and tempered expectations of near-term US rate cuts.
Coal stocks were standout performers as benchmark Newcastle coal surged 8.6% to US$128.70 per tonne — its biggest one-day gain in three years — after Qatar shut its largest LNG plant.
New Hope rose 7.4% to $5.10, Yancoal gained 4.9% to $6.49 and Whitehaven Coal added 3.2% to $8.19.
Among oil producers, Woodside edged 0.8% higher to $30.48, Santos firmed 1% to $7.28 and Ampol climbed 3.2% to $29.98.
In contrast, gold miners reversed recent gains despite heightened geopolitical tensions. Newmont fell 2% to $183.44, Northern Star dropped 3.2% to $30.71 and Evolution Mining declined 4.5% to $16.87. BHP eased 2.6% to $57.70.
Airlines remained under pressure, with Qantas down 1.8% to $9.24 — its lowest close since May — amid ongoing Middle East flight disruptions.
Real estate stocks also weakened after bond traders ramped up bets for another rate increase by May, following hawkish commentary from Reserve Bank governor Michele Bullock indicating every board meeting remains “live”.
Looking ahead, December quarter GDP is due today, with CBA economists lifting their growth estimate to 1.0% for the quarter, or 2.7% annualised. Endeavour Group is also set to report earnings.
US: Tech and travel lead declines
US markets recovered somewhat from session lows but still closed firmly in the red as investors assessed the potential fallout from a widening Middle East conflict.
The Dow Jones fell 0.8%, the S&P 500 lost 0.9% — after touching its lowest level in more than two months — and the Nasdaq declined 1%.
Airlines and travel stocks were hit for a second consecutive session, with Norwegian Cruise down 4.1%. Technology stocks fell 1.1%, including a 1.3% decline in Nvidia after gains in the prior session.
The private credit sector was also pressured after Blackstone’s flagship credit fund, BCRED, saw elevated redemption requests. Blackstone dropped 3.8% and Blue Owl Capital fell 2%.
MongoDB slumped 22% after forecasting quarterly profit below market expectations.
Shipping rates and energy prices rose as Tehran threatened to target vessels transiting the Strait of Hormuz, heightening concerns about global trade and supply chain disruption.
Europe: Banks lead sharp regional sell-off
European equities recorded their steepest one-day declines since April as investors priced in the risk of a prolonged regional conflict.
The FTSEurofirst 300 fell 3.1%, while the UK’s FTSE 100 dropped 2.8%. Germany’s DAX hit a three-month low and Spain’s finance-heavy benchmark sank 4.6% to its lowest level since mid-December.
Financials led the downturn, with the European banking index sliding to a near three-month low. HSBC fell 5.2%, weighing heavily on UK markets, as lenders with perceived Middle East exposure bore the brunt of selling.
Currencies: US dollar strengthens on safe-haven demand
The US dollar strengthened as geopolitical tensions drove demand for safe-haven assets
The euro fell 0.5% to US$1.1615, the Japanese yen weakened to JPY157.67 and the Australian dollar slipped 0.4% to US70.39 cents.
The firmer greenback added pressure to commodities priced in US dollars, particularly base metals and gold.
Commodities: Oil surges, gold retreats
Oil prices extended gains amid escalating supply concerns.
- Brent crude rose 4.4% to US$81.14 a barrel — its highest level since November 22 — as tankers avoided the Strait of Hormuz and insurers reportedly withdrew vessel coverage. Iran has warned it would target ships attempting to transit the strait.
- Copper futures fell 2.1% amid US dollar strength, while aluminium rose 1.8% on supply concerns. Iron ore edged 0.5% higher to US$99.57 per tonne.
- Gold futures dropped 3.9% to US$5,109 an ounce, pressured by the stronger US dollar despite elevated geopolitical risk.
Markets now turn to Australian GDP data and further developments in the Middle East conflict, which remain the key drivers of short-term sentiment.