Shares drop as US and Iran strikes hit fragile truce
Oil prices have risen and Australian shares are under renewed pressure after a US plan to reopen the Strait of Hormuz sparked a show of force by Iran and left a four-week ceasefire in limbo.
S&P/ASX200 fell 70.1 points at noon on Tuesday, falling 0.81 percent to 8,627 points, while the All Ordinaries index fell 67.7 points or 0.76 percent to 8,856.1 points.
Wall Street indexes fell from all-time highs overnight after a US pledge to support ships stranded in the Strait of Hormuz led to increased tensions.
Iran struck a United Arab Emirates oil port that hosts a US military base, while the US said it destroyed four small Iranian military boats and facilitated the passage of two commercial ships through the waterway.
“Tensions in the Strait of Hormuz escalated overnight as the US Navy began implementing ‘Project Freedom’,” said Westpac economist Ryan Wells.
“Brent oil prices rebounded 5.5 percent, sparking a sell-off in stocks and bonds as markets acknowledged upside risks to inflation.”
Only energy and IT shares were trading higher at lunchtime, with the ASX-listed technology sector building on strong performances from segment giants WiseTech and Xero.
Energy, oil and gas giant Woodside did heavy lifting as crude oil prices hit six-week highs, rising 1.1 percent to $32.46; Santos, coal producers and uranium stocks had difficulty recovering.
Refinery operators Viva Energy and Ampol gained 1 percent and 0.3 percent, respectively.
The heavyweight financial sector was under pressure, losing 0.9 percent, as the big four banks were sold off ahead of the Federal Reserve’s broad-ended rate hike later on Tuesday.
“Inflation was already appearing to be sticky before the escalation of conflicts in the Middle East, with price pressures in services, housing and food evident,” said VanEck senior portfolio manager Cameron McCormack.
“The recent rise in oil prices adds another layer of complexity and we are yet to see the full impact reflected in headline inflation.”
Westpac fell 1.3 per cent to $38.01 after its first-half net profit of $3.5 billion rose just one per cent on the same six months in 2025.
ANZ, NAB and Westpac failed to turn the lights out in their interim results and the Commonwealth Bank will publish its third quarter update on May 13.
Basic materials fell one per cent in a broad-based sell-off led by major miners BHP, Rio Tinto and Fortescue, as investors pondered a bleak global growth outlook.
Gold miners also retreated as the precious metal fell to five-week lows to trade at US$4,538 ($A6,339) an ounce, dragging the ASX gold subsector 1.2 per cent into the red.
On the other hand, shares of travel group Flight Center rose 3 percent after it maintained its fiscal 2026 cash profit target despite industry headwinds.
The Australian dollar bought 71.57 US cents, down from 71.97 US cents at 5pm on Monday.
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