Iran conflict: Here are the Aussie stocks being hit hardest by escalating war in Middle East

The escalating war with Iran prompted investors to dump travel and airline stocks after the Australian stock market opened on Monday in the wake of the closure of five major Middle Eastern airports.

Shares in national airline Qantas slumped 10 per cent at the open to $8.92 as Iranian strikes on Dubai Airport and across the Middle East’s key transport hubs triggered global travel chaos.

Leisure and corporate travel bellwether Flight Centre dropped 6 per cent and Webjet lost 5 per cent as investors bet the conflict could drag out for weeks or even months. Tech stocks also dived again as investors abandoned risk in favour of government bonds, cash, or hard assets.

“The deepness of the market’s reaction will be almost exclusively a function of how long the conflict lasts,” said Stephen Miller a market strategist at GFSM Funds Management.

“But for now it’s all highly speculative, nobody really knows where this conflict goes. Trump might think the Iranian regime will collapse and it will be a swift success, or, on the other hand, the US could get horribly mired in another Middle East conflict.”

At lunchtime on Monday, the benchmark index the S&P/ASX 200 was down 0.4 per cent. The dollar was 0.8 per cent lower at US70.6¢.

Gold extended a rally from Friday to add 1.9 per cent to trade at $US5377 an ounce. The $198 billion dual-listed gold miner Newmont jumped 6 per cent to $187.83.

Shares in investment bank Macquarie Group crashed 7 per cent in a move linked to a global sell-off in investment firms over concerns around their exposure to private credit markets.

Oil jumps

The war in Iran pushed Brent Crude oil futures as much as 12 per cent higher in early trade to $US81.89 a barrel, before giving back some of their advance to around $US79.45 on Monday morning.

The move lifted Australia’s largest oil and gas producer Woodside up 7 per cent in early trade, with gas producer Santos advancing 8 per cent, and Karoon Energy jumping 15 per cent.

“For Australia, the fallout from the conflict might not be as removed as elsewhere as we’re a long way removed from the conflict, we have a lot of commodities that might rise as a consequence of this and the Aussie dollar will probably fall a little bit,” said Mr Miller.

“For equities, it looks a net negative, but for gold, defence, and energy stocks it’s a positive.”

Among defence-linked stocks on the ASX, Droneshield jumped 12 per cent to $4.07 and naval ship-maker Austal added 3.6 per cent to $5.36.

Mr Miller also warned a prolonged conflict and rising energy prices would increase the risk of the US economy facing a “stagflation light” type scenario of very low growth and inflation persistently above the US Federal Reserve’s target of 2 per cent.

“So I call it stagflation light as this wouldn’t be like the oil shock of the 1970’s when inflation surged we had a double digit jobless rate and growth collapsed,” he said. “But the US and global economy could face a slowdown in economic activity, or flirt with a recession, at the same time as sticky inflation.”

US share futures pointed to falls at the opening bell on Wall Street, with the tech heavy Nasdaq Index pointing 0.6 per cent lower.

Gas prices climb

Gas futures traded in London surged 11 per cent as a broad rise in global energy prices threatens to spill across the Australian economy. The moves in gas and oil came after Iran attacked shipping in key energy shipping route the Strait of Hormuz.

“Higher oil and gas prices are certain as the closure of the Strait of Hormuz threatens to disrupt 15 per cent of global oil supply and 20 per cent of global LNG supply, with oil prices potentially exceeding $US100 a barrel if tanker flows are not quickly restored,” said Alan Gelder, a consultant for Refining, Chemicals and Oil Markets at Wood Mackenzie.

“Following US and Israeli attacks on Iranian government, military and nuclear facilities, Iran warned shipping away from the waterway and insurers withdrew coverage, effectively halting tanker traffic.”

Around $US500 billion of oil and gas flows through the narrow waterway between Iran and the United Arab Emirates each year, with around 150 vessels reportedly at anchor as traffic through the channel collapses.

In response to the uncertainty, the OPEC+ group of oil-producing nations agreed to hike production by 206,000 barrels a day in a Sunday meeting – a move that could offset some supply disruptions from the conflict.

A halt in liquefied national gas (LNG) flows through the Strait of Hormuz would be equally disruptive for global gas markets, according to Wood Mackenzie.

“With approximately 1.5 million [tonnes] of LNG exports at risk for each week that flows through the Strait of Hormuz are halted, both Asian and European markets would need to draw more heavily on existing storage and would increase the need for restocking over the summer,” said Wood Mackenzie analyst Massimo Di Odoardo.

“This would tighten market conditions well beyond the eventual resumption of trade through the Strait.”