Australian shares are poised for a strong start after global markets rallied overnight on news that a potential ceasefire agreement in the Middle East may be nearing completion.
ASX 200 futures were up 146 points, or 1.7%, to 8,794, pointing to a sharply higher open after US President Donald Trump said all parties involved in the conflict had approved a deal. Trump later told reporters he expected a signing ceremony in Europe this weekend and anticipated the Strait of Hormuz would reopen shortly afterwards.
The prospect of easing tensions triggered a broad risk-on rally across global markets, sending oil prices lower, bond yields down and equities sharply higher.
ASX retreats as banks weigh on market
The S&P/ASX 200 closed 20.1 points lower on Thursday, down 0.2% to 8,633.2, after renewed US military action against Iran unsettled investors.
The benchmark index fell as low as 8,555.3 during the session before defensive sectors helped limit losses. Four of the market's 11 sectors finished in negative territory.
Financial stocks bore the brunt of the selling as investors rotated into more defensive positions. Commonwealth Bank dropped 2.4% to $156.42, Westpac fell 2.6% to $34.50, ANZ lost 2.1% to $33.83 and National Australia Bank declined 1.8% to $35.68.
Technology stocks also weakened, reflecting overnight losses on Wall Street. NextDC fell 4.2% to $14.50 and Xero slipped 3.6% to $74.07, although Megaport rose 3.6% to $18.70 after launching a $309 million retail entitlement offer.
Defensive names attracted buying interest. CSL climbed 4.2% to $107.23, while Coles gained 1.6% to $24.10 and Woolworths added 1.2% to $38.09.
Energy stocks outperformed as oil prices initially surged on concerns over disruptions to shipping through the Strait of Hormuz. Woodside Energy rose 1.6% to $31.52 and Karoon Energy advanced 4.6% to $2.05.
Materials stocks recovered from early losses, with BHP adding 1% to $60.80. Gold miners lagged as Newmont fell 3.5% and Ora Banda Mining lost 6.4%.
Alcoa tumbled 8.3% to $93.90 after warning its alumina operations could face losses linked to energy disruptions stemming from the closure of the Strait of Hormuz.
Wall Street rallies on ceasefire optimism
US markets surged after Trump announced that planned military strikes against Iran had been cancelled and negotiations with Tehran had progressed significantly.
The Dow Jones Industrial Average rose 1.9%, the S&P 500 gained 1.8% and the Nasdaq Composite advanced 2.5%.
Materials stocks led gains across the S&P 500, while industrial companies benefited from the sharp decline in oil prices. Caterpillar rose 4.8%, Boeing gained 6% and GE Aerospace added 4%.
Technology shares were among the strongest performers. The Philadelphia Semiconductor Index jumped 7.9%, recovering from heavy losses earlier in the week.
Micron Technology, Arm Holdings and Marvell Technology each surged more than 11%, while Intel climbed 9.3%.
Tesla gained 4.6% and Nvidia rose 2.2%, helping lift the broader technology sector.
Travel-related stocks also rallied on expectations that lower fuel costs and improving consumer confidence would support demand. United Airlines rose 8.8%, Carnival advanced 8% and American Airlines jumped 9%.
Investors also continued to focus on SpaceX ahead of its highly anticipated market debut on Friday. Reports suggest the offering attracted more than US$100 billion in retail demand. Shares were priced at US$135, with Oppenheimer initiating coverage with an "outperform" rating and a US$190 target price.
European markets snap losing streak
European equities ended higher, breaking a four-session losing run as investors assessed the European Central Bank's latest interest rate decision.
The ECB lifted rates by 25 basis points, as expected, while raising inflation forecasts and lowering growth projections due to ongoing geopolitical uncertainty.
The pan-European FTSEurofirst 300 Index gained 0.7%, while the UK's FTSE 100 rose 0.5%.
Semiconductor-related stocks led gains, with BE Semiconductor Industries rising 6.6% and ASM International climbing 7.3% on continued optimism around artificial intelligence demand.
Rate-sensitive sectors underperformed. Financial services stocks fell 0.7%, while real estate stocks lost 0.8%.
Currencies and bonds
The US dollar weakened as investors moved back into risk assets.
- Australian dollar: up 0.7% to US70.45 cents
- Euro: up 0.4% to US$1.1577
- Japanese yen: up 0.4% to ¥159.93 per US dollar
US Treasury yields fell sharply as investors priced in lower geopolitical risk.
- US 10-year Treasury yield: down 8 basis points to 4.46%
- US 2-year Treasury yield: down 7 basis points to 4.06%
Commodities
Oil prices retreated after Trump signalled progress towards a diplomatic resolution in the Middle East.
Brent crude: down 2.9% to US$90.38 a barrel, having earlier traded below US$89
- Copper: up 0.2%
- Aluminium: up 0.4%
- Iron ore: down 0.1% to US$101.60 a tonne
- Gold was volatile amid the geopolitical developments. Futures settled 0.5% lower at US$4,114 an ounce before rallying above US$4,200 an ounce following Trump's ceasefire comments.
Looking ahead
Investors will be watching developments in the Middle East closely over the weekend, particularly any confirmation of a formal ceasefire agreement and the reopening of the Strait of Hormuz.
SpaceX's stock market debut is also expected to attract significant attention, with the company listing at US$135 per share and carrying an implied valuation of approximately US$1.77 trillion.