The Australian sharemarket is expected to open lower on Monday as renewed tensions in the Middle East cast doubt over a US-Iran peace deal and triggered a fresh rise in oil prices.
Futures indicate the S&P/ASX 200 will fall 0.2% at the opening bell, extending losses from the end of last week.
Investor sentiment was rattled after Iran claimed it had closed the Strait of Hormuz, one of the world’s most important oil shipping routes, following renewed hostilities involving Israel and Iran-backed Hezbollah militants in Lebanon.
The escalation came after US-Iran talks were rescheduled to Sunday in Switzerland. However, relations appeared to deteriorate further after US President Donald Trump threatened to restart conflict with Iran, even as Vice President JD Vance met Iranian officials under the terms of a memorandum of understanding agreed a week earlier.
Fox News reported Trump had told Iranian officials: “You close the strait, and you won’t have a country.”
The breakdown pushed Brent crude as much as 2.2% higher. It was up 1.4% at US$81.71 per barrel at the start of Asian trade.
The ASX is likely to be largely dictated by weekend headlines, given US markets were closed on Friday for the Juneteenth public holiday. S&P 500 futures were down 0.2%, although trading volumes were light.
Bond yields also climbed amid concerns that higher oil prices could add to inflationary pressures and force the Reserve Bank of Australia to lift interest rates again this year.
ASX falls on Friday as BHP drags market lower
Australian shares fell on Friday, with BHP Group leading the market lower after warning of cost overruns at its flagship Jansen potash project in Canada.
The S&P/ASX 200 Index declined 82.40 points, or 0.9%, to 8,828.70, with 6 of the 11 sectors finishing lower. Despite Friday’s fall, the benchmark ended the week 0.3% higher.
BHP wiped around 60 points from the index after telling investors that costs for Jansen Stage 1 and Stage 2 would be at least US$6.9 billion, or A$9.9 billion, representing a 42% increase on the original US$4.9 billion estimate.
Shares in BHP dropped 5.6% to $61.40, its biggest 1-day fall since April 2025, when it lost more than 6% following the fallout from Trump’s “liberation day” tariffs.
“The capex overruns at Jansen S1 and S2 raise questions about the returns and technical deliverability of BHP’s organic strategy over the next 5 years,” Barclays analyst Amos Fletcher said.
“This could see management attempting to execute 4 major growth projects simultaneously when it has been unable to manage the timeline and budget for 1.”
Materials stocks were also weaker as gold fell 1.7% to US$4,137 an ounce, with a hawkish Federal Reserve and renewed rate-rise expectations outweighing the earlier signing of an interim peace deal between the US and Iran.
Newmont fell 6.7% to $143.47 and Evolution Mining lost 5.1% to $12.54. Alcoa (NYSE:AA) dropped 6.9% to $83.14, taking its losses since June 3 to about 30% amid volatile trading in aluminium.
Investors rotated into defensive names against the uncertain backdrop. CSL rose 7.6% to $116.32, its biggest 1-day gain since February 2022, while Coles added 1.2% to $23.66.
4DMedical surged 17.6% to $4.54, taking gains over the past year to more than 1,650%.
Energy stocks benefited from firmer crude prices, with Woodside Energy rising 1.4% to $29.03.
US markets closed for Juneteenth
US sharemarkets were closed on Friday for the Juneteenth public holiday.
However, US stock market futures were down between 0.1% and 0.2%, albeit on low trading volumes, as investors monitored developments in the Middle East.
US Vice President JD Vance pulled out of a planned trip to meet Iranian negotiators in Switzerland on Friday after Iran said a clash between Israel and Iran-backed Hezbollah militants in Lebanon had violated its interim ceasefire with the US.
Iran subsequently claimed it had closed the Strait of Hormuz, just days after traffic through the strait had resumed.
On Thursday, US markets rose, led by technology shares and strength in semiconductor stocks. The Dow Jones added 0.1%, the S&P 500 rose 1.1% and the Nasdaq gained 1.9%.
Over the week, a firm pledge from new Federal Reserve chair Kevin Warsh to tackle inflation and ensure price stability prompted traders to price in at least 1 rate hike this year, compared with a negligible probability a couple of weeks earlier.
The shift in tone from the Fed weighed on Treasuries. Two-year yields rose nearly 10 basis points last week, while benchmark 10-year yields fell 3 basis points.
European markets edge lower
European sharemarkets edged lower on Friday as mining stocks followed weaker metals prices and investors remained cautious after US-Iran negotiations to end the Middle East conflict stalled.
The continent-wide FTSEurofirst 300 index ended down 0.2%, while the UK FTSE 100 fell 0.4%.
Mining stocks led the declines, falling 2.1% as commodity prices eased. London-listed miners Antofagasta and Pan African Resources were among the weaker performers.
An uptick in oil prices weighed on travel and leisure stocks, which fell 0.9%, while energy stocks climbed 1.3%.
Data showed German producer prices rose less than expected in May, increasing 2.2% year-on-year, offering some relief to investors concerned about higher energy costs feeding through to inflation.
Chip-equipment maker ASML fell 1.1% after saying it had never shipped an extreme ultraviolet lithography machine to China, following a report that US officials were concerned one of the company’s most advanced tools may have reached the country.
Netherlands-based hotel group PPHE dropped 15.8% after a £920.9 million takeover proposal from Israel’s Fattal Hotel Group fell through.
Currencies steady as investors weigh geopolitical risk
Currency markets were broadly steady against the US dollar as the US-Iran peace deal hung in the balance.
- The euro was flat at US$1.1455.
- The Japanese yen held near 40-year lows at JPY161.22.
- The Australian dollar rose 0.1% to US70.13 cents.
Oil rises as Middle East tensions return to focus
Global oil prices rose on Friday after the breakdown of US-Iran peace talks renewed concerns about supply risks.
Brent crude futures settled 0.9% higher at US$80.57 a barrel on Friday, before climbing further at the start of Asian trade on Monday following Iran’s claim that it had closed the Strait of Hormuz.
Brent was up 1.4% at US$81.71 per barrel early in Asian trading.
Base metal markets were partially open on Friday, although any trades on the day were rolled over until Monday.
Gold futures and iron ore futures markets were also partially open on Friday, with trades rolled over until Monday.
Looking ahead
In Australia, investors will be watching inflation data on Wednesday, with CBA economists tipping headline CPI will ease slightly to 4.1% in May.
In the US, chipmaker Micron’s earnings result on Wednesday will be closely watched as a barometer for momentum in artificial intelligence-related demand.