Australian shares rally as US, Iran reach peace deal
The Australian share market soared to an eight-week high and oil prices fell on news that the US and Iran had reached a peace deal.
While the S&P/ASX200 gained 122.2 points at noon on Monday, rising 1.39 percent to 8,926.2 points, the All Ordinaries index rose 128.3 points or 1.42 percent to 9,134.4 points.
eToro APAC chief analyst Josh Gilbert said markets have been expecting a breakthrough in the Middle East conflict for months, and the decline in energy costs is expected to have a negative impact on stocks and risk sentiment.
“However, investors should tread carefully before getting too ahead of themselves because there is always the temptation to follow the move in moments like these,” he added.
“The deal won’t actually be signed until June 19, details are still thin, and this conflict has shown more than once that headlines can turn on a dime.”
Miners led the stock market’s rise, with the materials sector gaining 3.9 percent in value, while gold miners also recorded a sharp recovery.
The precious metal’s rise to around US$4,315 ($6,100) an ounce supported the All Ordinaries gold subindex by more than eight per cent.
Megaminers BHP and Rio Tinto are up around three per cent despite fairly stable copper and iron ore futures.
Oil has been the commodity fueling market volatility; but Brent crude fell to $83.69 per barrel, its lowest price since March 10 and in the second week of the conflict.
Vivek Dhar, head of commodities and sustainability research at CommBank, said Brent could fall to $80 a barrel by the end of 2026 if the Strait of Hormuz remains open and oil and refined fuel exports resume quickly.
“Crude oil flows should be able to continue quickly and have a good chance of reaching pre-war levels within three to four months,” he said.
Mr Dhar said refineries in the Gulf were less fortunate and normalization would take between six months and a year.
As oil prices fell, local refinery operators Viva Energy and Ampol AEST lost 7.6 percent and 4.9 percent respectively at midday.
Woodside also lost 3.5 percent, downplaying speculation that it was in talks with Exxon for a potential takeover by the U.S. energy giant.
The rise in risk sentiment also helped boost the heavyweight financial sector, which rose 1.2 percent as all four big banks traded higher.
In company news, Chemist Warehouse owner Sigma Healthcare has abandoned plans to acquire UK beauty and pharmacy chain Boots, leading to a seven per cent rise in its share price.
Exchange operator ASX Ltd gained almost two per cent after settling a case with the corporate watchdog and admitting claims about the progress of the CHESS regeneration project, which is being scrapped in 2022, were misleading.
Shares in footwear company Accent rose by almost a tenth following a takeover offer from British company Frasers Group.
The Australian dollar was buying 70.74 US cents at 70.33 US cents at 5pm on Friday.
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