The ASX is set for a weaker start on Friday, with futures down 69 points (-0.8%) at 9:45 am AEDT, following a sharp sell-off on Wall Street as rising oil prices and renewed geopolitical uncertainty weigh on sentiment.
While headlines around a potential pause in attacks on Iranian energy infrastructure offered some late relief, sentiment remains fragile, with markets still taking their cues from a fast-moving and often contradictory news flow.
Wall Street pulls back as oil and yields climb
US markets fell across the board overnight, with the S&P 500 down 1.7%, the Dow losing just over 1% and the Nasdaq dropping nearly 2.4%, as technology stocks led the decline. The sell-off reflected higher oil prices feeding inflation concerns, pushing bond yields higher and tightening financial conditions.
US Treasury yields jumped again, with the 10-year moving above 4.4%, while volatility picked up sharply. The VIX rose more than 8%, signalling a shift towards a more defensive posture.
Tech stocks bore the brunt of the move, with ongoing pressure across semiconductors and AI-linked names as investors reassess valuations and earnings expectations.
Iran conflict keeps markets on edge
Geopolitics remains the central driver.
Conflicting signals around negotiations between the US and Iran continue to unsettle markets. While President Donald Trump indicated a temporary pause on energy-related strikes and highlighted progress in talks, reports of continued military escalation — including missile exchanges and troop deployments — suggest little clarity in the near term.
Oil markets are reflecting that uncertainty. WTI crude surged close to US$94 a barrel overnight, at one point rising much more sharply before pulling back on headlines around a possible pause in hostilities.
The broader concern is not just supply disruption, but the inflationary shock that sustained higher energy prices could trigger.
Commodities and currencies reflect risk shift
Commodity markets were mixed but volatile.
Gold dropped more than 3% as investors rotated away from recent safe-haven positioning, while copper and other base metals also weakened amid broader risk aversion.
Oil was the clear outlier, rising on renewed concerns around shipping disruptions in the Strait of Hormuz despite reports that some tankers are being allowed through.
In currency markets, the US dollar strengthened as investors sought safety, while the Australian dollar held just below US$0.69.
Cryptocurrencies also came under pressure, with Bitcoin falling around 3% as risk appetite faded.
ASX edges lower after brief consolidation
Locally, the ASX 200 slipped 0.10% on Thursday, giving back some ground after the previous session’s rally.
The market struggled for direction throughout the day, with early gains fading as confidence around a potential Middle East de-escalation weakened.
Energy stocks were a notable bright spot, rising 1.5% alongside higher oil prices, while defensive sectors including healthcare and utilities also held up relatively well.
In contrast, technology stocks fell sharply, down more than 2%, reflecting the broader global sell-off in growth names.
Materials were slightly weaker, while financials were broadly flat.
Small caps lose momentum
Risk appetite also cooled further down the market cap spectrum.
The Small Ordinaries fell 1%, while emerging companies dropped more than 1.3%, reversing some of the strength seen earlier in the week.
The shift suggests investors are becoming more selective again as macro uncertainty builds.
What to watch today
The ASX is now facing a weaker lead from offshore, with the overnight sell-off resetting the tone heading into the local session. Markets will be closely watching developments in the Middle East, particularly any confirmation of a pause in attacks or progress towards negotiations.
Corporate updates are relatively light, though early news flow includes Vulcan Energy beating on profit despite heavier project spending and Weebit Nano raising $87 million to push ahead with ReRAM commercialisation. Xero also announced a partnership with AI firm Anthropic aimed at integrating generative AI into its platform.
Beyond that, the focus remains firmly on macro.
For now, the market is navigating a familiar tension: hopes for de-escalation on one hand, and the risk of prolonged conflict — and higher inflation — on the other.