Over $300 billion has been erased from the Australian sharemarket since escalating tensions involving Iran. Threats and counterthreats have rattled investors, sparking concerns about further conflict escalation. Monday saw significant market volatility, with the S&P/ASX 200 initially plummeting by as much as 2 per cent before partially recovering to close 0.7 per cent lower.
The turmoil stems from heightened rhetoric between Washington and Tehran. Iranian officials have threatened to target key energy infrastructure in the Middle East. This follows warnings from US President Donald Trump about potentially “obliterating” Iran’s power plants. The uncertainty has driven Brent crude prices up by 50 per cent since the conflict began, reaching approximately $US112.84 a barrel on Monday afternoon.
Despite a partial recovery, the Australian sharemarket remains at its lowest level since May last year, having briefly entered correction territory. Bond markets also experienced volatility, briefly suggesting the Reserve Bank of Australia might raise interest rates four more times this year. Strategists emphasize that the current uncertainty presents a significant challenge, with the brinkmanship between the US and Iran fueling market anxiety and hindering prospects for near-term stability in oil prices.
As the conflict enters its fourth week, the Australian market sell-off is shaping up as one of the most severe outside the pandemic period. The All Ordinaries Index has plunged 9.4 per cent in the 16 trading days since the war commenced. Historical comparisons reveal similar patterns during past crises, such as Iraq’s invasion of Kuwait in 1990. Bell Potter analysts highlight the next 36 hours as critical, noting that markets have historically bottomed around the 18th day of such events.
