Oil, energy and gold stocks keep ASX stable amid Middle East attacks

A sharp jump in oil prices propelled energy companies higher on the Australian sharemarket as investors digesting the implications of unfolding attacks in the Middle East took refuge in safe haven trades.

Amid turmoil in Iran and surrounding states, the S&P/ASX 200 initially lost ground before rallying to close near where it started, up 2.3 points to 9200.9. Eight of the 11 industry sectors ended Monday in negative territory.

Oil resumed trading on Monday morning for the first time since the US and Israel launched the first attack on Iran on Saturday. The price of Brent, the international standard, jumped 6.7 per cent and West Texas Intermediate crude rose 6.4 per cent.

Energy companies soared on the back of oil’s jump. Woodside Energy surged 6.8 per cent, Santos rocketed 6.7 per cent, Yancoal rose 5.6 per cent and Ampol bounced 3.2 per cent higher.

Roundhill Financial chief executive Dave Mazza said he was closely tracking maritime traffic at the Strait of Hormuz, a narrow waterway that handles about one-quarter of the world’s seaborne oil trade. “This is about Hormuz risk, not retaliation. If shipping stays open, stocks can work through it,” Mazza said. “If it doesn’t, all bets are off.”

ICIS director of energy and refining Ajay Parmar said: “While the military attacks are themselves supportive for oil prices, the key factor here is the closing of the Strait of Hormuz.

”We expect prices to open [after the weekend] much closer to $US100 a barrel and perhaps exceed that level if we see a prolonged outage of the Strait.”

Australian gold miners jumped after the precious metal, long considered a safe investment in uncertain times, surged. Northern Star added 4.8 per cent and Evolution Mining jumped 6.6 per cent in early afternoon trade. Price movements among the iron ore heavyweights were mixed. Rio Tinto was up 1.3 per cent, BHP rose by 1.4 per cent and Fortescue slumped 3 per cent.

Financial stocks lost ground. Commonwealth Bank fell 0.7 per cent, National Australia Bank lost 2.9 per cent, Westpac shed 1.7 per cent and ANZ Group was 1.8 per cent lower.

The focus on oil and travel disruptions left Qantas 5.4 per cent lower. Fuel is a large cost for carriers and increases can easily erode margins or push up ticket prices, making them less attractive to passengers.

NAB head of Australian economics Gareth Spence said the Middle East conflict might affect consumer price inflation, financial markets, commodity prices and business and consumer confidence. It might also have a flow on to global and domestic growth, he said.

“Australia is a net energy exporter (largely gas and coal) and so higher energy prices flow through to higher revenue for the Commonwealth and state governments through royalties and profits and the household sector through income (largely dividends),” Spence said.

“But the pass-through to costs can be more immediate. Oil import values tend to adjust much more quickly than the prices for our commodity exports.”

Star Entertainment’s shares fell in its first trade since it released its results. The casino operator posted a $109.7 million loss for the December half-year as revenue continued to decline at its operations in Sydney and Queensland under the weight of regulatory reforms, including cash limits at Star Sydney. Its unaudited half-year accounts, posted late on Friday night, showed a 10 per cent decline in revenue to $584.9 million.

The Australian dollar was trading at US70.7¢.

US stocks sank on Friday as Wall Street kept punishing companies that could become losers in the artificial intelligence revolution. A surprisingly discouraging update on inflation also hurt the market, while oil prices climbed with worries about tensions between the US and Iran.

The losses came as investors returned to knocking down software companies and other businesses they suspect could get supplanted by AI-powered competitors.

Block, the company behind Cash App, Square and other businesses, gave a potential signal of what AI could do after chair Jack Dorsey said it would cut its workforce by nearly half. That is after he said 2025 had been a strong year for the company, which is sending more cash to shareholders through stock buybacks.

“Intelligence tools have changed what it means to build and run a company,” Dorsey said in a letter to investors while announcing Block’s latest profit results. “We’re already seeing it internally. A significantly smaller team, using the tools we’re building, can do more and do it better.”

The co-founder of Twitter (now X) also said: “I don’t think we’re early to this realisation. I think most companies are late. Within the next year, I believe the majority of companies will reach the same conclusion and make similar structural changes.”

Block is cutting more than 4000 jobs from its workforce of more than 10,000. Its stock jumped 16.8 per cent after it made the announcement, while unveiling its latest quarterly results.

Even companies whose revenue and profit are soaring because of AI-related demand are under pressure. Nvidia fell 4.2 per cent and was the heaviest weight on the US stock market. A day earlier, it had dropped to its worst loss since last northern spring, even though it reported a better profit than analysts expected and it forecast more in revenue for the current quarter.

On the winning side of Wall Street was Netflix, which climbed 13.8 per cent after walking away from its bid to buy Warner Bros Discovery’s studio and streaming business. That put Skydance-owned Paramount in a position to take over its Hollywood rival.

Paramount Skydance shares jumped 20.8 per cent and Warner Bros Discovery fell 2.2 per cent.

With Bloomberg, AP

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