Oil Prices Drive Market Drop
Australian Shares Fall Sharply as Oil Prices Top $101 Amid Middle East Tensions
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By late morning, the ASX 200 was down 1.8 per cent, putting it on track for its worst trading day since March 9 before recovering some ground by the close.
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Markets had fully priced in another RBA interest-rate increase by mid-2027, in addition to raising the probability of a hike at the bank’s September 29 meeting.
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RBA assistant governor Sarah Hunter said inflation remained the bank’s “top priority” and warned that the board “may well have to raise interest rates” if inflation appeared stronger than forecast.
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VanEck’s head of investments and capital markets, Russel Chesler, said the continuing Middle East conflict showed no signs of resolution and would leave the RBA with “no choice” but to raise rates later in the month.
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The sell-off was expected to continue into the following session, with ASX 200 futures down 80 points, or 0.9 per cent, while the US 10-year Treasury yield rose nine basis points to 4.93 per cent and European government bond yields also climbed.
Australia's stock market fell 1.03% on Middle East tensions and surging oil prices, with the S&P/ASX 200 closing at 8,819.40 after tumbling as much as 1.8% intraday. Oil topped US$101 a barrel amid escalating regional attacks, pushing up inflation expectations and raising the odds of another Reserve Bank rate hike this month to 79%, according to Head Topics.
Ten of 11 sectors fell, led by materials, technology, and financials. BHP, Rio Tinto, Fortescue, and major banks all posted losses as rising energy costs and climbing global bond yields fanned inflation fears. The Australian dollar eased to 72.14 US cents while US Treasury yields jumped nine basis points to 4.93%, as reported by IB Times.
Oil Shock Triggers Broad Market Sell-Off
The ASX 200 fell 1.03% as oil climbed above US$101 a barrel due to ongoing Middle East conflict and Strait of Hormuz disruptions. Market Index reported the index dropped 99.8 points, with the All Ordinaries declining 1.04%. Intraday losses peaked at 1.8%, marking the steepest fall in months before a modest recovery pushed the final close higher.
Rate-Hike Odds Jump As Inflation Fears Rise
Rising oil and bond yields pushed markets to assign a 79% probability to an RBA interest-rate increase by late September, up from 64%. Finance News Network noted that global Treasury yields climbed sharply, signalling both an inflation shock and tighter financial conditions. RBA assistant governor Sarah Hunter said inflation remains the bank's "top priority" and the board "may well have to raise interest rates" if inflation runs hotter than forecast.
Energy Stocks Lead, Banks and Tech Stumble
Materials, technology, and financial stocks took the hardest hits. BHP, Rio Tinto, and Fortescue fell sharply on copper weakness and inflation concerns. Telecommunications was the only sector to gain ground. Head Topics reported that major US benchmarks including the S&P 500 and Nasdaq also fell for a fourth straight session, weighing on Australian equities and signalling global pressure.
Eagers Automotive rose after announcing a proposed Zagame investment, bucking broader losses. ASX 200 futures pointed to further declines of 0.9% in the following session as bond yields remained elevated and oil prices stayed near 18-month highs, according to Market Index.
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