ASX slumps again as oil prices keep rising; Tech stocks fall after Atlassian job cuts

The market rollercoaster continued on Thursday, wiping another $35 billion off the ASX in a broad sell-off. Oil prices spiked again, despite a move from wealthy nations to release the largest volume of emergency oil reserves in history to battle the fuel price shock from the Iran war.

The S&P/ASX 200 fell 114.50 points, or 1.3 per cent, to 8269.0, with all 11 sectors in the red bar energy. The losses come after the ASX stepped up 0.6 per cent on Wednesday, boosted by the big banks amid predictions that the Reserve Bank will raise interest rates next week to battle inflation, which is feared to ramp up due to the war. The Australian dollar softened to US71.22¢.

S&P 500 futures were down 0.9 per cent, suggesting another rocky start for Wall Street on Thursday night.

The International Energy Agency (IEA) said on Wednesday its members will release a record amount of oil – 400 million barrels from stockpiles set aside for emergencies – to alleviate the fuel crisis. The move did little to calm markets: Brent crude jumped above $US100 a barrel again after Oman safety-cleared all vessels from its key export oil terminal and more tankers were attacked in Iraqi waters.

“With no end in sight to hostilities, shut-ins rising on a daily basis and the Strait [of Hormuz] effectively shut, we remain of the view that Brent is set to move into a new higher $US90-$US110 range through next week,” said Robert Rennie, head of commodity research at Westpac.

The biggest losers in the ASX’s latest sell-off were tech companies, as news that Atlassian will cut 10 per cent of its workforce because of the AI disruption rekindled concerns about the outlook for software makers. Rate hike fears also hurt the interest-sensitive sector. WiseTech Global lost 2.6 per cent, Xero slumped 4.1 per cent and Technology One fell 2.9 per cent.

But the banking and mining giants, which combined make up more than 55 per cent of the ASX, weighed heavily on the market. Financial stocks gave up their gains from Wednesday, with CBA down 0.6 per cent, National Australia Bank down 2 per cent, Westpac losing 1.2 per cent and ANZ Bank giving up 2.5 per cent.

Meanwhile, iron ore giants BHP, Rio and Fortescue ended down 1.9 per cent, 1.4 per cent and 1.5 per cent, respectively. Gold miners Evolution Mining (down 1.3 per cent) and Newmont (down 2.9 per cent) slipped as gold prices softened. Lynas Rare Earths bucked the trend, gaining another 2.8 per cent after it earlier this week won a commitment from Japan to pay guaranteed long-term prices for the critical materials.

Data centre owner Goodman Group was down 3.3 per cent, leading down real estate investment trusts, which fell as bond yields advanced. Higher bond yields make government bonds more attractive, luring investors away from the property sector. Consumer staples were sent lower by a 3.8 per cent drop in Endeavour shares as the bottle shop operator traded ex-dividend.

The only sector in the green were the energy giants, which climbed along with oil prices. Woodside gained 2.1 per cent and Santos advanced 1.5 per cent, while refiners Ampol and Viva Energy rose 2.9 per cent and 2.5 per cent, respectively. Coal miners Yancoal (up 10.5 per cent) and Whitehaven (up 6.7 per cent) surged as prices for their fossil fuel strengthened.

The falls on the ASX comes after a choppy, directionless trading session on Wall Street overnight. The S&P 500 edged down 0.1 per cent for a second day of modest moves following a wild start to the week. The Dow Jones dropped 0.6 per cent, and the Nasdaq composite rose 0.1 per cent.

“It’s all about the consumer, and how the shock of a sustained increase in oil prices is going to affect the consumer’s pocketbook and their spending habits,” said Matthew Keator, managing partner in the Keator Group, a wealth management firm in Massachusetts.

Since the start of the war, sharp moves for oil prices have triggered swings up and down for financial markets worldwide, sometimes by the hour. Oil prices briefly spiked to their highest levels since 2022 this week because of the possibility that production in the Middle East could be blocked for a long time, which raised worries about debilitating inflation for the global economy.

The oil surge continued even after a group representing many of the world’s wealthiest countries agreed to release the largest volume of emergency oil reserves in its history to counter the effects of the Iran war on energy markets. The International Energy Agency’s 400 million barrels of oil emergency release is more than double the 182.7 million barrels that its members released in 2022 after Russia’s full-scale invasion of Ukraine.

While such moves might contain oil prices in the near term, it will likely require a full resumption of the flow of oil and natural gas from the Persian Gulf area to fully ease the market. That has investors worldwide anxiously awaiting the end of the war.

The price for a barrel of Brent crude, the international standard, was up another 8.9 per cent to $US100.37 as of 4.33pm AEDT. A barrel of benchmark US crude gained 8.1 per cent to $US94.26.

Worries are centred on the Strait of Hormuz, a narrow waterway off Iran’s coast where a fifth of the world’s oil sails on a typical day. The war has halted most of that traffic, which means storage tanks for crude in the region are filling up because the oil has nowhere else to go. That in turn is pushing oil producers to say they’re cutting their output.

“The only thing that’s really going to bring oil prices back down is if we really see the Strait of Hormuz reopen,” Neil Beveridge, director of research at Sanford C. Bernstein & Co., said in an interview on Bloomberg Television. The flow rates from strategic reserves are “nothing compared with the 20 million barrels” a day of disruption from the Hormuz closure, he added.

The United States said it took out more than a dozen mine laying Iranian vessels, and the Islamic Republic vowed to block the region’s oil exports, saying it would not allow “even a single litre” to be shipped to its enemies.

High inflation, fuelled by the Iran war, combined with a stagnating economy would create a worst-case scenario called “stagflation” that central banks have no good tools to fix.

with AP, Reuters, Bloomberg

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