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

The Australian stock market staged a cautious comeback on Tuesday 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 to back below $US90.

Investors initially cheered the news and dove heavily back into the S&P/ASX200, which 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 the index swung back and forth for much of the session and ended the day up just 1.1 per cent to 8692.6.

The recovery came after a market bloodbath on Monday, 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 overnight 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 just over 2 per cent while miners jumped 1.7 per cent. Health care, real estate, telco, banking and consumer discretionary stock also added solid gains.

But the energy sector copped a beating, closing down more than 3 per cent. Woodside Energy tumbled 3.8 per cent.

Among the biggest winners were Life360 (up 10.3 per cent), Neuren Pharma (up 9.2 per cent), Droneshield (up 8.4 per cent), Telix Pharma (up 7.8 per cent) and Paladin Energy (up 6.7 per cent).

“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.”

IG’s Tony Sycamore said Mr Trump’s rhetorical shift — from earlier demands for unconditional surrender to Monday night’s more measured tones — was a welcome relief.

But his “very complete” narrative has proved difficult for markets to fully embrace.

“The Strait of Hormuz remains largely blocked for commercial traffic, and Iran’s appointment of Mojtaba Khamenei — son of the slain Ayatollah Ali Khamenei — as the new Supreme Leader signals continuity in the regime’s hardline stance.”

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.