Australian share market: Middle East war uncertainty sends S&P/ASX200 into freefall

Australia’s share market has been smashed in the opening minutes of trade on Wednesday, led by a rout in mining stocks.

The 11 sectors that make up the S&P/ASX200 was a sea of red, with mining stocks down 4.2 per cent.

Consumer staples, industrials, utilities and the banks were also in negative territory. Only IT and energy stocks managed to eke out marginal gains.

After reaching all-time highs late last week, uncertainty over the time frame for US President Donald Trump’s attacks on Iran have seen the index tumble almost 3 per cent over the past five trading days.

It was down 1.67 per cent by 7.30am to 8926.4 points — well off the all-time intraday high of 9200.9 reached on Monday.

Miners made up the list of the top-five worst-performing stocks.

Westgold Resources plunged almost 9 per cent, uranium miner Paladin Energy lost 8.5 per cent, while gold miners Capricorn Metals (down 8.2 per cent), Genesis Minerals (down 7.9 per cent) and Perseus Mining (down 7.7 per cent) also copped a beating.

The rotation out of the precious metal came after gold slumped almost 4 per cent, weighed down by a stronger dollar, the prospect of less monetary easing and forced selling tied to an equities rout amid an escalating Middle East conflict. It was trading at $US5131.67 overnight.

Gold has rallied by almost 20 per cent this year, with demand supported by persistent geopolitical and trade tensions as well as concerns about the Fed’s independence. The revival of investor fears about inflation and currency debasement added fresh impetus to a multi-year rally.

BHP took the biggest hit among the major iron ore miners, tumbling just over 4 per cent as the Big Australian also admitted its coal assets in Queensland can no long compete for capital. Fortescue was down more than 3 per cent while Rio Tinto only fell about 2 per cent.

Mexican fast-food chain Guzman Y Gomez, Life360, Mesoblast, Catapult Sports and white goods maker Breville Group each added about 3 per cent.

The overall fall followed a poor lead from Wall Street overnight, with stocks falling as investors worry how long the Middle East conflict may persist.

Investors are concerned about the effect of the conflict, now in its fourth day, on inflation as oil prices extended sharp gains. Israeli and US forces hit targets across Iran, prompting Iranian retaliatory strikes around the Gulf as the conflict spread to Lebanon.

“While not much has changed fundamentally since yesterday, investors are growing anxious about the duration of the war and its impact on energy prices,” said Joseph Tanious, chief investment strategist at Northern Trust Asset Management.

More to come.