ASX wipes out $50b as oil prices surge; unemployment rises

Investors on the Australian sharemarket lost more than $50 billion on Thursday as oil prices spiked yet again following attacks on some of the Middle East’s most important energy facilities. The latest escalation raised concerns of a more lasting economic fallout from the Iran war.

The S&P/ASX 200 fell 142.80 points, or 1.65 per cent, to 8497.90 – its lowest level since late November, following two days of modest gains. The Australian dollar was trading at US70.42¢.

With the geopolitical uncertainty and concerns about exploding energy costs weighing on the market, investors also digested the nation’s latest unemployment figures. The unemployment rate unexpectedly rose from 4.1 per cent to 4.3 per cent in February, the Australian Bureau of Statistics said this morning. Economists had expected it to keep steady.

Given the surge in oil prices, the labour market data has to be viewed as a baseline rather than a forward signal for the economy, warned CreditorWatch’s chief economist Ivan Colhoun. The figures pre-date “the sharp rise in oil prices recorded over the course of this month, which, if not reversed, will likely impact hiring plans, growth and business confidence in coming months,” he said.

Eight of the 11 industry sectors on the ASX declined, with the only big winner of the session being energy, which climbed in line with oil prices. Brent crude soared to around $US112 per barrel after strikes intensified between Iran and Israel on critical energy facilities — which also caused extensive damage to the world’s largest liquefied natural gas export plant in Qatar.

Australia’s biggest oil and gas company, Woodside, jumped 7.2 per cent, while the second-biggest, Santos, climbed 3.2 per cent. Refiners Ampol and Viva Energy surged 4.6 per cent and 15.2 per cent, respectively. Coal producers also rose, with Yancoal up 6.8 per cent and Whitehaven up 2.3 per cent.

Utilities and consumer staples were the other green islands in the ASX’s sea of red as investors switched to more defensive sectors, with supermarkets Woolworths and Coles finishing up 2 per cent and 1.5 per cent.

Mining stocks led the sell-off for the rest of the market, with iron ore giants BHP (down 3.5 per cent), Fortescue Metals (down 3.4 per cent) and Rio Tinto (down 3.2 per cent) all trading lower amid concerns a war-induced slowdown in the global economy will hurt demand. BHP’s key commodity of the future, copper, fell to the lowest since December.

Gold producers Northern Star, Evolution Mining and Newmont tumbled 9.5 per cent, 9.6 per cent and 5.8 per cent, respectively, after gold declined for a sixth day, its longest losing streak since late 2024. Federal Reserve Chair Jerome Powell said overnight higher energy prices will push up overall inflation and called for mildly restrictive US interest rates, which sent gold down by 3 per cent as it’s priced in US dollars and typically performs well in a lower-rate environment.

Airlines were sold off again amid concerns about soaring jet fuel costs and extended disruptions in air travel because of the war, with Qantas down 3.4 per cent and Virgin Australia falling 3.7 per cent. Flight Centre dropped 2.5 per cent.

Interest-rate sensitive sectors also posted big declines. Software makers WiseTech Global and Xero led the tech sector lower with falls of 7 per cent and 3 per cent, and AI data centre operator Next DC dropped 2.4 per cent. On the consumer discretionary front, Bunnings and Kmart owner Wesfarmers lost 2.1 per cent, electronics retailer JB Hi-Fi fell 2.4 per cent and furniture seller Harvey Norman shed 2.1 per cent.

Data centre and warehouse owner Goodman Group (down 2.6 per cent) and Westfield shopping centre landlord Scentre (down 3.1 per cent) paced losses for property stocks.

The crucial financial sector was also lower, with National Australia Bank and Westpac down 1.3 per cent and 1 per cent, and ANZ Bank slipping 0.3 per cent. However, CBA inched up 0.2 per cent.

On Wall Street overnight, US stocks slumped after a report said inflation was primed to worsen even before the war with Iran caused oil prices to spike. That and comments from Fed chief Jerome Powell pushed Wall Street to see less chance of getting the lower interest rates it loves.

The S&P 500 fell 1.4 per cent and flipped to a loss for the week so far. The Dow Jones dropped 768 points, or 1.6 per cent, and the Nasdaq composite slid 1.5 per cent.

The losses deepened after the Fed decided to keep its main interest rate steady, instead of resuming cuts meant to give the job market and economy a boost. Fed officials are still penciling in one more cut by the end of 2026, but Powell suggested those projections may be worth less than usual because of how much more uncertainty exists about inflation and the economy.

“We just don’t know,” Powell said about what will happen with oil prices, along with how long President Donald Trump’s tariffs will take to work their way fully through the system.

Oil prices have soared because the war has disrupted the Persian Gulf’s energy industry. If the disruptions keep oil and gas prices high for long, they could create a debilitating wave of inflation for the global economy.

A report released on Wednesday morning showed inflation pressures in the US economy were already building before the war began. It said inflation at the US wholesale level unexpectedly accelerated last month to 3.4 per cent.

Such numbers were likely factors in keeping the Fed on hold Wednesday. Powell said the rule of thumb has been for the Fed to look through jumps in oil prices, which could be only temporary, but he said that works only if expectations for upcoming inflation don’t spike themselves. He also noted that several Fed officials downgraded their forecasts for rate cuts this year to one from two, even though the overall median Fed official is still calling for one.

That pushed traders to slash their own expectations for a single rate cut by the Fed this year. They’re now betting on less than a coin flip’s chance of that, 49 per cent, down from the 95 per cent probability they saw a month ago, according to data from CME Group.

That sent Treasury yields upward in the bond market, along with the higher-than-expected update on inflation at the wholesale level. The yield on the 10-year Treasury climbed to 4.26 per cent from 4.20 per cent late on Tuesday and from just 3.97 per cent before the war with Iran started. Higher Treasury yields grind down on prices for all kinds of investments, from stocks to crypto to gold.

Despite its reputation as a safe haven during uncertain times, gold looks less attractive to investors when Treasury bonds are paying more in interest because it pays its owners nothing.

with AP, Bloomberg

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