Markets: Oil jumps, shares slump in volatile week as war fatigue hits

Global oil prices surged higher over another whipsaw week for asset markets as shares tumbled and traders trimmed expectations about the likelihood of interest rate increases from the Reserve Bank.

On Friday, benchmark Brent Crude futures advanced 3 per cent to top $US106 a barrel to put them on track for an 18 per cent weekly gain as expectations evaporated the Strait of Hormuz would reopen to allow the transit of around 20 per cent of the world’s oil and gas supplies.

“I think there’s bit of fatigue going on with markets and (President) Trump,” said Dean Fergie the founder of Cyan Investment Management.

“At the start of the war the market would move on his every post, now it pays less attention to him, as if he could be a bit of a mad-man or a liar in what he says.”

Traders watch Middle East

Analysts blamed oil’s rebound to its highest level since April 7 on a stalemate between the Washington and Tehran even as the US said it had brokered a three-week ceasefire in the conflict between Iran and Lebanon on Friday.

“Since Wednesday, there has been no concrete evidence of progress towards a deal, the Iranians seemingly refusing to come to the table while the US’s blockade remains in place, and the US refusing to end the blockade until a deal is agreed,” said Westpac economist Elliot Clarke.

“Both sides have halted and seized ships within their area of operations, but this has not triggered a ceasefire breach.”

The worries around the energy supply shock stoking inflation and the cost of living sent the S&P/ASX 200 down 1.7 per cent over the week to 8786.50 points, versus a close of 8946 points last Friday. Among the worst performing sectors were healthcare, banks and mining.

Global bond yields — as a yardstick for the cost of government borrowing — also rose as investors demanded more compensation for higher inflation flowing through from soaring energy prices.

AMP’s Chief Economist, Shane Oliver, said oil futures pricing — as a measure of how much the market expects oil to cost over the rest of 2026 — still points to a fall in prices later this year.

Dr Oliver added that he believed Trump seeks an off-ramp from the war, after the President extended the ceasefire between Iran and the US for an indefinite period on April 21.

“But it all remains very messy and uncertain,” said Dr Oliver.

“There’s still a significant risk that the war could re-escalate if agreement on a deal is not reached soon. This could see the US expanding its bombing and Iran retaliating by hitting more ships in the Strait of Hormuz and getting the Houthi’s to do the same in the Red Sea.”

About 20 million barrels of oil and petroleum products were shipped every day through the strait before the war, with daily oil demand at around 100 million barrels a day.

In Australia the government led by Prime Minister Albanese reassured the public on Thursday that the nation has 46 days of fuel supplies in reserve, versus 36 days at the end of February. Diesel reserves are at 31 days and aviation fuel 30 days, as the government scrambled to find alternative fuel sources to traditional Asian refineries that are reliant on the Strait of Hormuz being open.

“We’re in deeply tumultuous and turbulent global times, and people are aware of that, and can see that that is the case. We are doing what we can to alleviate this issue,” Albanese said on Friday.

Oil uncertainty spooks traders

The worries around an economic slowdown from the Middle East also led interest rates traders to reduce the chances of an RBA rate hike in May to 69 per cent, versus 72 per cent at the start of the week.

Professional ASX equities investor Mr Fergie warned the damage from rising energy and goods prices is already forcing local companies to warn that their profits may be lower than expected.

This week saw National Australia Bank increase its provisions for bad debts from borrowers, as hearing aid giant Cochlear also warned the Middle East conflict is damaging its sales. The stock collapsed more than 40 per cent over the week in its largest wipe out in history.

“Cochlear shows any bad news gets taken pretty badly by the market,” said Mr Fergie.

“We see if the market runs it runs really quickly so there’s this fear of missing out, but everyone is also very skittish and sensitive to good and bad news, so that means more volatility.”

Elsewhere on Friday iron ore and copper prices eased amid a broad fall in base metals prices as traders worried the extension of the Middle East conflict will slow global economic activity.