Wall Street slumps on Iran conflict; Oil prices surge
Staff writers
Updated ,first published
The Australian share market fell sharply in early trading after oil prices rose further overnight on concerns about an expansion of the war with Iran, following a sell-off on Wall Street and other markets around the world.
The S&P/ASX 200 index fell 139.50 points, or 1.5 per cent, to 8938 by 10:08 AEDT, falling below the 9000 level. The morning’s losses come after the ASX lost 1.3 per cent on Tuesday. The Australian dollar was trading at 70.42¢ at 8.44am AEDT.
On Wall Street, the big moves that rattled U.S. stocks in early trading eased significantly as the session continued overnight. At the end of trading, the S&P 500 lost 0.9 percent of its value. That would be a significant loss on an ordinary day, but the index had fallen as much as 2.5 percent on concerns that the war could do more permanent damage to the global economy than feared.
The Dow Jones fell 403 points, or 0.8 percent, after falling more than 1,200 points earlier in the day. The Nasdaq composite narrowed its losses to 1 percent.
Just the day before, Wall Street had opened with sharp losses, but it recovered it all and closed the day with slight gains. Helping fuel that recovery was a record showing that past wars and conflicts in the Middle East generally don’t mean long-term pain for U.S. stocks.
However, this was done with the warning that oil prices would not rise above US$100 per barrel. Oil prices rose again on Tuesday, sparking further alarm. The barrel price of Brent crude oil, the international standard, briefly rose above $84.
However, the decrease in the rise during the day helped soften the losses in the shares. Brent rose 4.7 percent to $81.40. This was down from less than $70 a week ago. The barrel of benchmark US crude oil increased by 4.7 percent to $74.56.
The moves showed that oil prices and how much they will worsen inflation are among investors’ key fears. More expensive fuel will mean less money for households to spend. This will also increase expenses for companies around the world, which will likewise hurt their profits. And corporate profits are the lifeblood of stock markets.
The latest rise in oil prices comes after Iran struck the US Embassy in Saudi Arabia as part of expanded targets to include areas critical to the world’s oil and gas production. Concerns are particularly high about the Strait of Hormuz off the coast of Iran, a narrow passage through which about a fifth of the world’s oil passes.
Iranian Brigadier General Ebrahim Jabbari, an advisor to the paramilitary Revolutionary Guard, said, “The Strait of Hormuz is closed” and promised that all ships passing through here will be set on fire.
Fears about oil prices eased somewhat later in the day when President Donald Trump said the US Navy could begin escorting tankers across the strait “if necessary” to “keep the flow of energy to the world”.
Questions are increasing about how long this war can last, making the situation uncertain for the markets.
A major strike by the US and Israel has already killed Iran’s supreme leader Ayatollah Ali Khamenei, but President Donald Trump said on his social media network late Monday night: “With the ammunition supply the US has, wars can be fought ‘forever’ and very successfully.”
Some professional investors have once again said that this does not look like the beginning of a long-term bear market and that stocks could rebound if the battle does not last that long, but they acknowledge that it may take some time for this to become clear and the fluctuations in the markets show how uncertain things are.
Tuesday’s sales began in Asia; The Kospi stock index in South Korea, a major energy importer, fell 7.2 percent as markets reopened after the holidays on Monday. This was his worst day since two summers ago, and he had been breaking records lately.
Tokyo’s Nikkei 225 index fell 3.1 percent even though analysts said Japan had a large stockpile that would last more than 200 days. In Europe, where natural gas prices increased rapidly due to the war, France’s CAC 40 index lost 3.5 percent of its value.
Meanwhile, the rise in oil prices will worsen still-high inflation and increase oil and shipping bills, putting further pressure on households and businesses.
The damage to stock markets has so far been concentrated in companies and countries that use a lot of oil, natural gas and petroleum-based fuels.
On Wall Street, nearly three in four stocks in the S&P 500 fell. Unlike the day before, influential Big Tech stocks failed to support the indices and Nvidia fell 1.3 percent.
Among the gainers on Wall Street was Target, which rose 6.7 percent after the retailer reported better-than-expected profits in its latest quarter.
Treasury bond yields jumped in the bond market in the morning due to inflation concerns. The yield on the 10-year Treasury note briefly rose above 4.10 percent, then fell to just below 4.06 percent. On Friday, the last trading day before the war began, the rate was only 3.97 percent.
Higher yields could make it more expensive for U.S. households and businesses to borrow, affecting everything from mortgages to bond issuances. They also suppress the prices of stocks and all kinds of other investments.
When the Treasury pays more interest, it can also reduce the price of gold, which gives investors nothing. Gold fell 3.5 percent on Tuesday to settle at $5123.70 an ounce, halting a strong rally above $5300 as investors looked for safer places to park their money.
High inflation could also tie the Federal Reserve’s hands and prevent it from lowering interest rates. The Fed cut interest rates several times last year and has indicated further rate cuts will occur in 2026. This could help stimulate the U.S. economy and job market, but lower rates could also worsen inflation.
According to data from CME Group, traders are now postponing their predictions about when the Fed may continue interest rate cuts until the summer months. This is despite Trump calling on Fed officials in angry and personal terms to cut interest rates immediately.
with AP
The Market Summary newsletter is a summary of the day’s transactions. Let’s each take ittoday afternoon.
