BHP, Rio slump in wild end to week for shares as war escalates in Middle East

Australia’s heavyweight iron ore miners dragged the share market lower on Friday to cap a wild week of trade as investors watched the dramatic escalation of the war in the Middle East.

The miners’ dip underpinned a whipsawed market, as energy stocks jumped, travel shares plunged, gold climbed, and the tech sector staged a spectacular rebound on expectations it’s sheltered from the chaos in the Middle East.

“It’s a very tricky market, I’d call it whippy and things are changing everyday,” said Dean Fergie, a portfolio manager at Cyan Investment Management.

“So, it’s better not to be rash, something like selling travel stocks and buy energy stocks might sound good short term, but it’s impossible to know we could see a ceasefire and oil back down tomorrow, so you can’t trade these big events perfectly, but can ride out the storm.”

At the closing bell, BHP had plunged 4.2 per cent to $52.81 on reports China’s state-backed iron ore buyer China Mineral Resources Group (CMRG) ordered traders to avoid its iron ore, with Rio Tinto sliding 3.6 per cent.

“BHP’s had a huge run and its earnings engine is moving away from iron ore to copper,” said Mr Fergie. “The stock’s also up 20 per cent in a few months and people are probably just taking some chips off the table, I wouldn’t panic and jump out just on a small blip like this.”

A spokesperson for BHP declined to comment, although sources close to the miner insist negotiations are ongoing with CMRG over terms to the resolve the months-long standoff and supply China’s steel mills.

Travel stocks dive, oil prices climb

The iron ore worries pushed the flagship S&P/ASX 200 Index down 1 per cent for a 3.8 per cent loss over a week dominated by worries around soaring oil, gas and diesel prices stoking Australian and global inflation.

On Friday afternoon, benchmark Brent Crude oil prices fetched $US84.40 a barrel, up around 2 per cent in 24 hours to take their move higher to 16 per cent since the conflict erupted. London Gas Oil prices — as the benchmark for diesel — surged 43 per cent, with European jet fuel prices up 70 per cent over the week.

“Crude oil extended gains (overnight) as investors become increasingly concerned about a prolonged war in the Middle East,” said ANZ Bank’s economics team. “Iran launched a fresh wave of missile and drone strikes across the Gulf, with attacks reported in the UAE, Bahrain and Qatar.”

Supplies of liquefied natural gas (LNG) out of Qatar were also shut down on Tuesday, after an Iranian drone struck the nation’s Ras Laffen export hub in a move that sent European gas prices 50 per cent higher.

Qatar accounts for about 20 per cent of the world’s total LNG production, with oil and gas cargo tankers also effectively prevented from sailing through the Strait of Hormuz after Iran threatened to attack any shipping that attempted the passage. The narrow waterway normally has around 20 per cent of the world’s total oil and gas volumes sailing through it.

On the share market, Australia’s largest oil and gas producer Woodside Group jumped 11 per cent to $30.75 over the week, with gains in 10 of the last 13 trading sessions. While LNG giant, Santos Ltd, jumped 9.8 per cent to $7.41 a share.

Citi’s Energy Analyst Sam Wallington said Asian LNG prices had surged over the past week, and tipped Woodside to outperform Santos if the regional war drags on for a month or more.

“During periods of market dislocation, such as the Russia–Ukraine gas shock, LNG trading and portfolio optimisation delivered disproportionate returns for WDS highlighting the potential earnings upside in a prolonged disruption scenario,” Mr Wallington said.

According to Bloomberg, more than 23,000 commercial flights have been cancelled since the launch of what US President Trump called Operation Epic Fury. The disruption to fuel supplies out of the Middle East and travel chaos saw listed travel businesses on the local share market plunge in value.

Shares in national carrier Qantas plunged nearly 11 per cent over the week to $8.92, with Virgin Australia losing 9 per cent to $2.90. Global leisure and corporate travel business Flight Centre lost 6 per cent with the stock falling in eight out of the last 11 trading sessions.

AMP’s chief economist Shane Oliver said he expects the share market damage and soaring oil prices could soon flow through to Australian households.

“A 40 cents a litre rise in petrol prices would add about 0.8 per cent to consumer price index (CPI) inflation, but it would also impart a dampening impact on growth,” he said. “This is because it would add around $14 a week to the household petrol bill leading to a cut back in spending elsewhere in the economy. In other words, it will act as a tax on households.”

The chaos also pushed the Australian dollar around 1 per cent lower over the past week as worries around global growth were offset by rising commodity prices that benefit the local economy.

Tech rebounds, gold miners’ wild swings

Gold prices also slid overnight to $US5126 an ounce amid a wild week of volatility as the traditional safe-haven play was battered by uncertainty over how the conflict with Iran will unfold.

The precious metal jumped 5 per cent over Monday and Tuesday in an immediate response to the conflict, with The World Gold Council reporting history shows it climbs 57 per cent of the time in response to global wars.

Over the week, the ASX’s largest listed gold miner, Newmont Ming, swung wildly between a high of $191.90 a share on Tuesday to a low of $164.30 on Friday. Other miners also swung violently with Northern Star hitting a high of $31.96 on Monday before crashing to $26.98 on Friday’s closing bell.

Friday’s bright sector on the local share market was technology led higher by a rebound in major software companies.

It surged 4.6 per cent on Friday, although has still crashed around 36 per cent over a horror six-month run sparked by worries about competition from AI services.

Among the best performers were WiseTech up 10.8 per cent to $52.73 and Pro Medicus, which jumped 9.2 per cent to $132.70 at its highest level since February 11.