4.30: ASX crashes as inflation set to rise again
Australian shares came close to entering a technical correction on Monday as intensifying rhetoric between the United States and Iran stoked fears the conflict could broaden in its fourth week. A technical correction is typically defined as a fall of more than 10% from a recent peak.
The S&P/ASX 200 dropped 62.50 points, or 0.7%, to 8365.90, marking its lowest close since May 2025, after falling as much as 2% earlier in the session. The benchmark is now down 9.1% from its March 2 peak, erasing about $300 billion in market value since the conflict began.
Inflation forecast as more rates pain expected
UBS economist George Tharenou has raised Australia’s inflation forecast, tipping headline consumer price inflation to peak at about 5.2% in the June quarter as higher energy costs flow through the economy.
The revised outlook follows a sharp jump in global oil and fuel prices, with UBS estimating automotive fuel alone could add at least 1 percentage point to monthly CPI in March.
Tharenou said the energy shock amounted to a “negative supply shock” that would lift inflation while also weighing on economic activity. UBS has accordingly cut its 2026 GDP growth forecast to 2.1%.
The bank now expects the Reserve Bank to lift the cash rate by 25 basis points in May, while warning the risk remains skewed toward further tightening if energy prices stay high.
UBS said the backdrop leaves policymakers in a difficult position, with higher inflation colliding with weaker economic growth.
1.12: Gold rises and falls again
The S&P/ASX 200 fell 50.70 points, or 0.60%, to 8,377.70 today, marking a fresh 50-day low. Catalyst Metals Limited and Ora Banda Mining Ltd are the index’s weakest performers so far, down 12.77% and 9.32% respectively.
Gold volatility
Just as quickly as gold gained, it fell again.
Gold was volatile after recording its biggest weekly fall in more than 40 years, with the Middle East conflict moving into its fourth week and the US and Iran trading warnings of further strikes.
Spot gold dropped 1.7% to $US4,415 an ounce on Monday after briefly slipping to almost $US4,300, following an 11% decline last week, its sharpest weekly fall since 1983.
Higher oil prices since the conflict began have added to inflation concerns and reduced the likelihood of near-term interest rate cuts from the US Federal Reserve and other central banks, putting pressure on non-yielding gold, which has now fallen for 8 straight sessions.
11.30: ASX slumps to 10-month low
It's a bloodbath an hour and a half into trading. The Australian sharemarket dropped to a 10-month low in morning trade as the Middle East conflict entered its fourth week and investors reacted to a fresh escalation in tensions involving Iran and the US.
The S&P/ASX 200 fell 122.60 points, or 1.5%, to 8305.80 by 11.15am AEDT, leaving the benchmark at its lowest level since May. The index has now lost 10% since the conflict began on February 28, with energy the only sector trading higher.
Oil prices eased after an initial gain as markets weighed a 48-hour ultimatum from US President Donald Trump for Iran to fully reopen the Strait of Hormuz or face military strikes, alongside Tehran’s threat of further reprisals. Brent crude was down 0.4% to US$111.78 a barrel.
The move kept support under local energy stocks, with Woodside Energy up 0.9%, Santos gaining 1.3%, Ampol rising 1.2% and Viva Energy advancing 2.1% in morning trade.
Mining stocks came under pressure as gold recorded its biggest weekly loss since 1983. Investors have reassessed the outlook for interest rate cuts as higher oil prices lift inflation risks, weighing on sentiment across the resources sector.
Evolution Mining dropped 6%, Northern Star lost 5.2% and Newmont fell 5%. Diversified miners also weakened, with BHP down 2.4% and Rio Tinto off 2.5%.
The major banks also moved lower, adding to the market’s decline. Commonwealth Bank slipped 1.9%, ANZ fell 2.1%, Westpac lost 2.3% and National Australia Bank dropped 2.4%.
Gold steadies after historic sell-off as inflation risks cloud rate-cut outlook
Gold edged higher after last week’s steep sell-off, supported by dip-buying even as rising energy prices and reduced expectations for near-term rate cuts continued to act as a headwind.
Bullion rose as much as 1% to above US$4500 an ounce in early trade, after losing nearly 11% last week in its worst weekly performance in more than 40 years.
Spot gold was last up 0.5% at US$4515.75 an ounce. The metal has now fallen for 8 straight sessions, pressured by a stronger inflation outlook and the prospect that the US Federal Reserve and other central banks may keep rates higher for longer.
Traders were also watching technical signals, with bullion’s 14-day relative-strength index rebounding after falling below 30, a level some market participants view as indicating oversold conditions.
The ASX is set to open sharply lower on Monday, with futures pointing to a 156-point fall, or 1.8%, to 8343 as investors brace for another round of heavy selling.
The expected drop follows a bruising finish on Wall Street on Friday, where US shares and bonds both sold off as tensions in the Middle East intensified and traders began factoring in the risk of higher inflation and tighter monetary policy.
The latest market volatility was due to an escalation in rhetoric from US President Donald Trump, who warned over the weekend that the US would “obliterate” Iranian power plants if Iran did not fully reopen the Strait of Hormuz within 48 hours.
The threat has added to concerns about global energy supply, with the Strait of Hormuz remaining effectively closed since the conflict began late last month. The waterway handles about 20% of global oil and gas shipments, and the disruption has already driven a sharp rally in crude.
Oil climbs above US$112
Oil climbed above US$112 a barrel on Friday after reports emerged that the Pentagon was preparing potential ground force deployments into Iran, while speculation also grew that the White House was considering action targeting Kharg Island, Iran’s main export terminal.
The surge in oil prices rattled global markets. The S&P 500 fell 1.5% on Friday, while 10-year US Treasury yields jumped more than 10 basis points as investors started pricing in the possibility of a US interest rate rise by October.
Stephen Miller, investment strategy adviser at GSFM in Sydney, said markets were reacting to the unpredictability of the situation.
“The markets are subject to the whim of whatever thought comes into Donald Trump’s brain at any particular point in time,” he said.
Miller said investors were also beginning to recognise that even if the conflict eased, the pressure on oil markets could last longer.
“Markets are starting to wake up to the fact that even if this conflict gets resolved or de-escalates, the impact on oil markets will be longer lasting,” he said.
Locally, attention is likely to fall on mining stocks, particularly after gold slipped below US$4500 an ounce. The materials sector has now fallen more than 20% from its early March peak, adding to pressure on the broader market.