Australian share market: Cautious comeback on ASX200 after oil drops back under $US90

The Australian stock market has staged a cautious comeback after Donald Trump signalled overnight that the US and Israel’s campaign of attacks against Iran could soon be at an end.

His comments to a reporter from US news network CBS saw the oil price plunge by about $US30 a barrel, sparking a late rally among US markets in the final hour of trade and lifting Australian equity futures more than 2 per cent.

The S&P/ASX200 had climbed almost 1.8 per cent after the first 30 minutes to 8749.5 — still well off last week’s highs of more than 9160 points. But it later fell back to 8714.6 — up 1.3 per cent.

The index was smashed almost 2.9 per cent lower on Monday to 8599, wiping more than $90 billion in value from Australia’s top 200 companies and taking losses for the past five trading days since last Tuesday to more than 6 per cent.

Monday’s was the biggest one day sell-off on the Aussie market since Mr Trump announced his so-called Liberation Day tariffs last April.

Mr Trump told CBS he thought “the war is very complete, pretty much”.

That sent benchmark oil prices tumbling, dropping to $US89.69 — down more than 30 per cent from a high around $US118 a barrel it hit on a wild session of trade Monday. US West Texas Intermediate oil also fell around 25 per cent to $US94.77 a barrel.

IT stocks on the local market mounted the biggest recovery, up almost 4 per cent while miners jumped 2.1 per cent. Health care, real estate, telco, banking and consumer discretionary stock also added solid gains.

The energy sector was the only one of 11 in the red, knocked 2.7 per cent lower on the falling oil price.

“Volatility is the price of entry right now, and investors who understand that will be far better positioned than those who try to time their way around it,” said market analyst at eToro, Josh Gilbert.

“This is a market being driven by headlines, those headlines can turn on a dime. That’s making this a challenging environment for investors.

“For investors watching from the sidelines, there are going to be nerves about buying into these dips right now, and that’s understandable.

“Normally in a sell-off like this, we’d see dip buyers stepping in aggressively, but the appetite for that is going to be more cautious this time around given just how quickly the outlook can shift. Rebounds of this nature are going to happen, but that doesn’t mean the risk is past us.

“Markets are going to remain volatile and reactive to every development in the Middle East over the coming days and weeks and the situation on the ground is still serious.”

US stocks rebound on oil price retreat

Wall Street stocks clawed their way back from a steep selloff to close higher overnight.

Early in the session, oil prices reached their highest levels since mid-2022 due to constricted supply arising from shipping disruptions as the war on Iran entered its tenth day.

Ballooning energy prices could metastasise into a broader inflation spike at a time when many US consumers are struggling with affordability.

The stock market’s intraday swings as investors digest headlines have added volatility to the trading day in recent weeks.

“There is still an awful lot of uncertainty out there regarding the duration of the conflict, as well as the duration of the closure of the Strait of Hormuz,” said Sam Stovall, chief investment strategist of CFRA Research in New York.

“Again today, seeing such a relative reversal in price movements indicates that investors are looking for any opportunity to jump back into the equity markets.”

Those mounting worries, combined with Friday’s weaker-than-expected employment report, raise the possibility of economic stagflation, which would trap the US Federal Reserve between the two sides of its dual mandate — price stability and full employment.

Hopes of de-escalation of the widening Middle Eastern conflict dimmed after Iran selected Mojtaba Khamenei to succeed his father as supreme leader, a choice US President Donald Trump, who has called for Iran’s unconditional surrender, deemed unacceptable.

More to come.