Australian shares are poised to open higher, buoyed by improving investor sentiment as markets increasingly price in the prospect of a diplomatic resolution to the Iran conflict.
ASX 200 futures were up 35 points, or 0.4%, to 8,690, following a broad-based rally across global equities and a sharp retreat in oil prices overnight.
Risk assets rallied as hopes of a deal to reopen the Strait of Hormuz gained traction, while safe-haven demand for the US dollar eased. The Australian dollar strengthened to US71.73 cents.
This marks the first full trading session back for both US and UK investors after Monday public holidays.
Pepperstone head of research Chris Weston said markets were no longer focused on exact timing for a resolution, but rather the overall direction of negotiations.
“The tone has been consistently towards some sort of resolution,” Weston said.
“We’ve become very patient for a resolution deadline.”
Attention today will also turn to New Zealand’s central bank, where all 23 economists surveyed by Bloomberg expect rates to remain unchanged.
ASX200 posts third straight gain
The ASX200 closed 35 points higher yesterday, up 0.4% to 8,692, extending gains for a third consecutive session as optimism around a possible US-Iran breakthrough supported risk sentiment.
The index climbed as much as 56 points intraday to a high of 8,713 before easing into the close.
Materials led the advance, rising 1.84%, while Consumer Discretionary and Information Technology both added 1.02%. Energy was the weakest sector, down 2.41%, followed by Telcos (-1.32%) and Health Care (-0.67%).
Gold miners rallied strongly as bullion prices jumped 1.4% to US$4,572 per ounce. Resolute Mining surged 9.39% to $1.34, Genesis Minerals climbed 8.47% to $6.40 and Capricorn Metals gained 5.95% to $14.06.
Major iron ore miners also advanced, with BHP up 1.62% to $60.20, Rio Tinto adding 1.62% to $187.81 and Fortescue rising 1.67% to $21.86.
Consumer discretionary stocks benefited from easing concerns around further Reserve Bank tightening after softer Australian jobs data last week. Myer gained 4.35% to $0.24, while Nick Scali rose 1.49% and Baby Bunting added 1.48%.
Energy stocks slump as oil tumbles
Energy shares came under heavy selling pressure after crude prices dropped roughly 5% on expectations the Strait of Hormuz could reopen.
Karoon Energy fell 5.69% to $1.99, Viva Energy lost 5.63% to $2.18 and Woodside Energy dropped 4.24% to $30.74.
Coal stocks bucked the broader energy weakness after reports of a deadly explosion at a major Chinese coal mine fuelled supply disruption concerns.
Whitehaven Coal jumped 8.7% to $8.87, Yancoal Australia gained 7.48% to $7.04 and Coronado Global Resources surged 20.93% to $0.26.
Elsewhere, Charter Hall climbed 6.67% to $5.10 after delivering its third earnings guidance upgrade this year.
Qantas rose 5.76% to $8.45 as lower oil prices improved sentiment toward airline stocks, despite confirmation that delivery delays for its Airbus A350-1000ULR aircraft would push ultra-long-haul Sydney-London and Sydney-New York services into next year.
The Australian rates market begins the session pricing in 3 basis points of tightening for June and around 29 basis points of hikes across 2026.
Europe rallies while US markets remain closed
With US markets shut for the Memorial Day holiday, investor focus shifted to Europe, where equities rallied on growing confidence around a possible US-Iran agreement.
The German DAX rose 2% to its highest level since January, while the pan-European STOXX 600 gained 1%, recovering all losses recorded since the start of the Middle East conflict.
Banks and airlines led gains across the region as falling oil prices improved the outlook for fuel-sensitive sectors.
The FTSEurofirst 300 also finished more than 1% higher. London markets were closed for a public holiday, with the FTSE 100 having ended Friday up 0.2%.
Despite the rally, geopolitical risks remain elevated following reports of explosions near Bandar Abbas and renewed US strikes targeting Iranian Revolutionary Guard speedboats near the Strait of Hormuz.
US President Donald Trump also reiterated demands that Iran’s enriched uranium either be surrendered to the United States or destroyed under international supervision, underscoring the fragility of ongoing negotiations.
In Asia, Japan’s Nikkei surged almost 3% to break above the 65,000 level for the first time, while Taiwan equities also reached record highs.
Currencies and commodities
The US dollar weakened against major currencies as risk appetite improved.
- The euro rose 0.3% to US$1.1642.
- The Japanese yen strengthened to 158.92 per US dollar.
- The Australian dollar climbed 0.6% to US71.73 cents.
Oil prices posted steep losses, with Brent crude down 7% to US$96.30 a barrel after briefly falling below US$97, compared to around US$112 a week earlier.
Analysts expect oil prices to remain elevated even if a peace agreement is reached, citing ongoing supply chain disruptions linked to the conflict.
Copper prices advanced as both the US dollar and oil weakened. Three-month copper on the London Metal Exchange rose 0.9%, while the most-traded Shanghai copper contract gained 1.1%. Aluminium added 0.5%.
Gold futures climbed 1.1% to US$4,573.60 an ounce as lower oil prices and a softer US dollar supported demand for bullion.
Iron ore futures were closed.
Looking ahead
In Australia, investors will be watching April CPI data due tomorrow, while Newmont and Elders trade ex-dividend today. Ryman Healthcare is also scheduled to release earnings results.
In the US, earnings reports are due from Zscaler today, followed tomorrow by Marvell, PDD Holdings, Synopsys, Agilent Technologies, HP and Best Buy.