ASX rebounds after Trump sparks Wall Street surge; Oil tumbles below $US95

The Australian sharemarket has clawed back some of its losses from Monday’s $80 billion rout after oil prices tumbled following US President Donald Trump’s comments that the Iran war is “very complete”.

The S&P/ASX 200 closed 93.60 points, or 1.1 per cent, higher at 8692.60 on Tuesday, having gained as much as 1.8 per cent during the session. Seven of its 11 industry sector finished in the green, led by a recovery in tech stocks, miners and the big four banks. Energy stocks were lower as oil prices dropped from near $US120 a barrel to about $US93 in late afternoon AEDT.

Investors’ cautious sigh of relief comes after the ASX lost 2.9 per cent on Monday, its biggest sell-off since Trump’s “Liberation Day” global tariffs announcement in April, as panic about an oil crunch spread through markets. However, the ASX’s initial gains moderated in the afternoon as S&P 500 futures edged down 0.2 per cent, suggesting a lacklustre start to trading in the US.

“What we’re seeing now is more of a relief rally after an extreme risk-off episode, rather than a genuine shift back into a full risk-on environment,” said Dilin Wu, a research strategist at Pepperstone Group.

Sentiment had been boosted late in Wall Street’s session overnight after Trump told CBS News that he thinks “the war is very complete, pretty much”. The US president’s comments calmed worries that had built earlier in the day, when the price for a barrel of Brent crude briefly touched $US119.50 a barrel, its highest since 2022, when Russia invaded Ukraine. Brent was 5.9 per cent lower at $US93.17 in late afternoon (AEDT) while West Texas Intermediate fell 6.2 per cent to $US88.87.

On the ASX, energy stocks were the biggest losers, falling along with the oil prices, with oil and gas giant Woodside Energy losing 3.8 per cent, Santos falling 3.4 per cent and refiner Ampol slumping 4.5 per cent. Coal producers were also lower as the price of the fossil fuel eased back from $US150 a tonne. Yancoal dropped 3.2 per cent.

Financial stocks rose across the board after their heavy losses in the previous session, with the Commonwealth Bank and ANZ both up 1.4 per cent, National Australia Bank rising 1.7 per cent and Westpac gaining 1.9 per cent.

Mining stocks jumped. BHP bounced 2.3 per cent while Fortescue, which announced it has completed its acquisition of Canadian mineral exploration company Alta Copper, rose 1.2 per cent. Gold miners Northern Star (up 2.6 per cent), Evolution Mining (up 1.7 per cent) and Newmont (up 2 per cent) advanced.

Biotechnology giant CSL rose 1.3 per cent, leading healthcare stocks higher, as it outlined plans to spend $US1.5 billion ($2.1 billion) to expand manufacturing operations in the US. Health imaging company Pro Medicus jumped 6.2 per cent after announcing its US subsidiary has signed two five-year contract extensions worth at least $40 million.

Tech stocks also rebounded, with WiseTech adding 0.8 per cent, Technology One rising 4.3 per cent and family tracking app Life 360 surging 10.3 per cent.

Among aviation stocks, Air New Zealand slumped 3.8 per cent after shelving its full-year profit forecasts because of the Middle East conflict. Qantas edged up 0.5 per cent and Virgin Australia rebounded 4.4 per cent.

Overnight, Wall Street went on a rollercoaster ride, dropping as much as 1.5 per cent in the morning before flipping to a gain of 0.8 per cent. The Dow Jones clawed back a plunge of nearly 900 points to rise 239 points, or 0.5 per cent, while the Nasdaq composite climbed 1.4 per cent.

The whipsaw Wall Street session underscored how exposed markets remain to every development in the Middle East conflict, with a single headline enough to reverse billions of dollars in losses.

Concerns have focused in particular on the Strait of Hormuz, a narrow waterway off Iran’s coast that one-fifth of the world’s oil travels through on a typical day. Iran had earlier threatened to set fire to ships in the strait. Trump said he was “thinking about taking [the Strait of Hormuz] over”, according to CBS.

If oil prices stay particularly high for long, households’ budgets already stretched by high inflation could break under the pressure. Companies, meanwhile, would see their bills rise for everything from fuel and stocking shelves to data warehouses. It raises the possibility of a worst-case scenario for the global economy, “stagflation”, where growth stagnates and inflation remains high.

The US stock market has a history of bouncing back relatively quickly from past military conflicts, as long as oil prices don’t stay too high for too long. Some professional investors continue to suggest falls in share prices could offer opportunities to buy them cheaply before they rise again.

“We continue to believe that the current acute shortage of oil will be reversed in the coming months as new supply comes online and oil should drop significantly,” according to Sameer Samana, head of global equities and real assets at Wells Fargo Investment Institute.

Even with all the recent swings in the market, the S&P 500 index that sits at the heart of many retirement accounts is still within 3 per cent of its record set in January.

To be sure, prices could reverse again in the coming days, given all the uncertainties about the war. That’s what happened through the huge swings that rocked Wall Street last week.

With AP, Bloomberg, Reuters

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