ASX plunges with $130bn wiped from sharemarket amid spike in oil prices over Middle East crisis | Business
Australian shares tumbled on Monday, wiping nearly $13 billion off the value of the ASX by midway through the trading session, after a sharp rise in oil prices caused by conflict in the Middle East raised concerns about a burst in global inflation.
The benchmark S&P/ASX 200 fell 4% below 8,500 points in midday trading; This marked the largest single-day decline since Donald Trump announced “redemption” tariffs last year.
The selloff is linked to disrupted oil supplies, which are a major contributor to global inflation and make nearly all goods and services, from oil to groceries to utilities and travel, more expensive.
Global oil prices spooked investors by surpassing US$100 per barrel shortly before the Australian stock market opened for the week.
Archival Garcia, managing director of Melbourne transport technology company Fluent Cargo, said the market effects of the conflict extended beyond energy markets.
“Fuel costs are rising, war risk insurance premiums are rising, ships are slowing down or changing course, and freight rates are rising, especially in energy-dependent supply chains,” Garcia said.
Sign up: AÜ Breaking News email
The energy price shock follows escalating violence in the Middle East over the weekend, intensifying concerns about persistent supply shortages that have sent crude oil prices to a four-year high.
The ASX was a sea of red on Monday, except for the energy sector, which has profited from the turmoil.
The impact of the conflict on the market was initially muted due to expectations that the war would be short-lived. Losses in global markets have accelerated in recent days as conflicts spread to the region and hopes for a quick solution diminish.
“Local markets reflect the intense global risk-off mood,” IG Australia market analyst Tony Sycamore said in a report released shortly before the market opened on Monday.
Sycamore also noted that the Federal Reserve’s aggressive stance against inflation through expected interest rate hikes (so-called hawkish signals) is increasing downward pressure on markets.
If the RBA raises interest rates at its March meeting next week, many Australians will find themselves paying rising mortgage rates while at the same time oil and other household costs rise, which will inhibit spending.
High interest rates are one of the three traditional triggers for selloffs in stock markets, along with some type of exogenous shock such as rising unemployment and war.
