US closes in on Iran deal, oil falls, ASX set for gains
Staff writers
Updated ,first published
Australia’s stock market opened lower after the US military said it had carried out “self-defense” strikes in southern Iran; This triggered doubts about an imminent end to the war, just hours after President Donald Trump said peace talks with Tehran were progressing.
Banks and property trusts led losses as the S&P/ASX 200 index fell 56.4 points, or 0.7 per cent, to 8635.60 just before 11am GMT. The decline came after the ASX rose 0.4 per cent on Monday as hopes of a deal to end the US-Iran war boosted investor confidence and dragged oil prices lower. The Australian dollar was down 0.1 percent in early trade to 71.68¢.
A US military spokesman said in a statement that the latest strikes, which included attacks on Iranian missile launch sites and mine-laying boats, were carried out “to protect our troops from threats posed by Iranian forces” but that the military “exercised restraint during the ongoing ceasefire.”
According to Iran’s state television Nour News, the US-Israeli attack took place south of Larak Island in the Strait of Hormuz and many Iranian personnel were killed, but no further details were given. Trump had previously said negotiations with Iran on a deal to extend the ceasefire and reopen the strait were “progressing well.”
While expectations that the ceasefire will last longer and the strait will be reopened are increasing, the renewed conflicts reveal the fragile nature of the current ceasefire. The critical waterway has been almost completely closed since the US and Israel attacked the Islamic Republic in late February; This attack triggered an energy shock and triggered a wave of global inflation.
Global stocks rose to record highs and crude oil fell overnight after officials signaled that the United States and Iran were nearing an agreement to reopen the strait and restart the flow of oil. Brent crude oil rose again after the latest conflict news this morning, rising 1.6 percent to $97.68 per barrel.
Energy stocks were mixed after WTI crude fell more than 6 percent to around $90 a barrel on Monday, amid optimism about an imminent peace deal and a rebound in oil prices this morning. Oil and gas giant Woodside lost 0.8 percent, rival Santos gained 0.5 percent, refinery Ampol lost 1 percent and Viva Energy remained flat.
Banks led the market’s declines in early trading. CBA fell 1 per cent, Westpac fell 1.2 per cent, Westpac fell 1.8 per cent and ANZ Bank fell 0.9 per cent.
Property investment trusts led Goodman Group, the ASX’s biggest property share, to tumble 4.2 per cent following its third-quarter trading update. The company said it is “at least” on track to meet its target of 9 percent operating EPS growth this year by repositioning its asset holdings toward large infrastructure-scale industrial properties and AI data centers.
Goodman said the key constraint on delivering the infrastructure needed to power the digital economy was energy availability, and warned that the scale of data center investment required to meet customer demand would likely exceed the current financing capacity of global capital markets.
Bucking the trend, Kogan shares rose 16.9 per cent after the online retailer said earnings rose 25.4 per cent to $26.9 million in the 10 months to April 30 as the Mighty Ape business turned around and Kogan.com showed strong profitability.
The ASX’s overall market losses in early trading came as S&P 500 futures contracts rose 0.7 per cent and the Nasdaq 100 rose 0.9 per cent. Wall Street was closed overnight for the Memorial Day holiday.
The hope of ending the war, which deeply affected the global economy, mobilized world markets overnight. The MSCI All Country World Index, the broadest gauge of global equities, rose 0.5 percent to its highest closing level of all time. Europe’s benchmark Stoxx 600 rose for a sixth consecutive session, closing at the highest level since the start of the war. Trading volumes were weak; Some markets, such as the UK, Switzerland, Norway and Denmark, were closed for holidays.
The improvement in risk sentiment comes after weeks of stalemate between the United States and Iran following earlier efforts to reach a deal.
“Clearly a FOMO factor is contributing to the unexpectedly strong global risk appetite: Investors don’t want to be left out if the Iran war ends as the AI theme continues to lift the stock market,” said SEB strategist Dana Malas.
Italy’s benchmark stock index surpassed its all-time high closing level in 2000, as a recent rally in energy and chip stocks pushed it to record highs. Among individual stock moves in Europe, Delivery Hero rose more than 10 percent after receiving a buyout offer from Uber Technologies that valued the German delivery company at about €10 billion ($16.2 billion).
Investors are focused on inflation. They have fully priced in the Fed to raise interest rates by the end of the year, underscoring expectations that US central bank governor Kevin Warsh will need to act quickly. Later this week, US Personal Consumption Expenditures data and inflation readings across Europe will offer clues about the direction of price pressures and interest rates.
Warsh, who has promised the biggest shakeup of the U.S. central bank in decades, was sworn into office on Friday. Trump emphasized that he wanted Warsh to run the Fed independently and tried to downplay investors’ concerns that he would pressure the new central bank governor on policy decisions.
According to BlackRock, the Fed may have sufficient reason to justify cutting interest rates rather than raising them under new chairman Warsh.
Elsewhere, China has launched an unprecedented campaign against illegal cross-border trading to stem capital outflows, threatening heavy fines against popular brokers and ordering the liquidation of non-compliant accounts within two years.
AP via Bloomberg
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