Global Markets | Australian shares slide as Middle East oil shock fans rate hike fears

The benchmark ⁠S&P/ASX ⁠200 index fell 1.3% to close at 8,629.00 points. It has slid more than 6% so far in March, putting it on track for its worst monthly performance since September 2022.

Oil prices once again shot up to $100 a barrel following reports of the attacks, triggering another wave of exodus from risk assets as higher crude prices raised concerns about global inflation and tighter monetary policy.

“In the absence of positive ⁠developments regarding Iran ‌and the Strait of Hormuz, equities are expected to remain in risk-off mode given the overarching inflation worries from oil price spikes,” said Tim ⁠Waterer, chief market analyst at KCM Trade.

Markets have begun reflecting those worries: swaps now indicate a near 75% chance of a quarter-point rate hike at the central bank’s meeting next week, up from around 20% before the conflict in the Middle East began.

Live Events

Analysts at ANZ on Thursday joined the other three major Australian banks in changing their call to a March hike and predicting a further move to 4.35% in May.
A tighter interest rate ‌environment could apply the brakes to economic growth, complicating matters for Australian stocks, said Waterer. Households already appear to be tightening their belts. An index of household spending compiled by Commonwealth ⁠Bank of Australia indicated a decline in February for the first time in 17 months.

On the bourse, heavyweight financials and miners lost 1.5% and 1.7%, respectively.

An index of blue-chip stocks, including the “Big Four” banks and major iron ore miners, fell 1.2%.

Healthcare, technology and real estate sectors also declined between 1.5% and 3.5%.

Energy stocks gained 2.1%, capping losses. Yancoal Australia jumped 10.5% to about a nine-year high and Whitehaven Coal advanced 6.7%.

In New Zealand, the benchmark S&P/NZX 50 index fell 0.7% to 13,199.29 points.