The ASX is set for a weaker Monday open, with futures down 41.2 points (-0.46%) as of 9:30 am AEST, reversing earlier gains as investors react to a sharp escalation in US–Iran tensions and renewed volatility in energy markets.
The turnaround follows a weekend breakdown in peace talks and the announcement of a US naval blockade of the Strait of Hormuz, with initial optimism giving way to a more cautious, risk-off tone.
Wall Street pauses after strong weekly rally
US markets finished mixed on Friday, with the S&P 500 easing 0.11% and the Dow Jones falling 0.56%, while the Nasdaq edged 0.35% higher.
The softer close ended a seven-day winning streak for the S&P 500, though the index still recorded its best weekly performance since November, rising 3.6% over the period.
The tone was more selective than earlier in the week. Technology stocks held up, supported by gains in chipmakers, while software names remained under pressure, with the sector sliding further and now sitting at its lowest levels since late 2023.
The shift suggests investors are becoming more discerning again, after the broad-based rebound driven by ceasefire optimism in recent sessions.
Strait of Hormuz tensions return to focus
Geopolitics have quickly moved back to centre stage.
US–Iran peace talks in Islamabad collapsed after more than 20 hours of negotiations, with disagreements over nuclear commitments and control of key shipping routes proving insurmountable.
In response, President Donald Trump announced an immediate US naval blockade of the Strait of Hormuz, ordering military forces to interdict shipping and clear sea mines — a move that has significantly raised the stakes in the region.
Iran has responded with warnings of a forceful reaction to any military presence, while key allies including the UK have signalled reluctance to support the blockade, adding further uncertainty to the situation.
The Strait remains one of the world’s most critical energy corridors, and any sustained disruption will continued to have far-reaching implications for global markets.
Commodities surge as risk-off tone returns
Commodity markets reacted sharply to the escalation, with energy leading the move.
- WTI crude jumped more than 8% to US$96.57 a barrel
- Gold fell around 1.6% to US$4,751/oz
- Copper dropped 1.7%, reflecting renewed growth concerns
The divergence highlights a shift back towards a more cautious positioning, with oil pricing in supply risk while industrial metals retreat on weaker demand expectations.
Currency markets reinforced that tone, with the Australian dollar falling 0.7% to around US$0.701, as investors moved back into the US dollar.
Meanwhile, bond yields edged higher, with the US 10-year yield rising to around 4.32%, reflecting persistent inflation concerns.
ASX slips into weekend, but holds strong weekly gains
Locally, the S&P/ASX 200 edged 0.14% lower on Friday to 8,960.6, as traders pared risk ahead of the weekend’s geopolitical developments.
Despite the modest decline, the index still posted a strong weekly gain of more than 3%, with financials, materials and consumer-facing sectors leading the advance.
Sector performance on Friday reflected a more cautious tone:
- Real estate and utilities posted modest gains
- Materials, energy and technology stocks drifted lower
Among notable movers:
- Telix Pharmaceuticals Ltd (ASX:TLX) rose 7.3% after regulatory progress in the US
- AMP gained 4.2% on positive AGM commentary
- Orora and Whitehaven Coal Limited (ASX:WHC) both declined amid softer sentiment
The overall picture points to a market that had been building momentum — but is now facing a fresh test from renewed geopolitical risk.
What to watch today
Markets are set to open on the back foot, with the next move likely to hinge on how investors respond to the latest escalation in the Middle East.
- Energy markets: Oil and fuel supply dynamics will be closely watched after the Strait blockade announcement
- Geopolitical headlines: Any escalation or diplomatic response could quickly shift sentiment
- US earnings season: Set to begin this week, with a focus on how companies are navigating inflation and volatility
There are no major domestic data releases today, leaving markets largely at the mercy of global developments.
After last week’s strong rebound, the tone has shifted again — with energy, inflation and geopolitics back in focus as key drivers of market direction.