Oil surges after Donald Trump threatens Strait of Hormuz blockade, dragging ASX lower as energy stocks rise

Benchmark oil prices surged in early Asian trade after US President Donald Trump said he would blockade the Strait of Hormuz to prevent any energy tankers from transiting the waterway bordered by Iran and Oman.

The Australian share market opened down 0.5 per cent, with every sector lower except energy. Shares in fuel distributor and refiner Viva Energy jumped 7.2 per cent to $2.69 at their highest level since the Middle East conflict began.

Brent Crude futures for May delivery jumped 8.7 per cent to $US103.80 a barrel and US WTI oil rose 8 per cent to $US104.39 a barrel, after prices fell last week on the back of Iran and the US agreeing to a 10-point peace plan for two weeks.

The move higher in oil also comes after talks between the US and Iran in Pakistan ended without a definite peace deal on Sunday.

“Trump said he would implement a full naval blockade of the Strait of Hormuz, stopping the trickle of vessels, primarily from China, that have been traversing the strait,” said ANZ Bank’s economics team.

“Iran responded by saying that the approach of any military vessels would be considered a breach of the ceasefire agreement. Markets are likely to react negatively today.”

Wall Street futures pointed to heavy losses at the opening bell in New York.

Gold prices fell 1.5 per cent to$US4676 an ounce and risk bellwether Bitcoin tumbled 3.5 per cent to $US70,725.

“Tensions will be further elevated after Trump warned that the US would implement a naval blockade to the Strait [of Hormuz],” said ANZ Bank. “Not only does this restrain exports from Persian Gulf oil producers, but it will also restrict Iran’s ability to export oil and will exacerbate the supply disruptions the market is experiencing.”

Coal miners, oil producers rise

On the S&P/ASX 200 the best performing stock was Karoon Energy, up 7 per cent to $2.13. Gas producer Beach Energy jumped 6 per cent.

Heavyweights Woodside Energy and Santos climbed 3.6 per cent and 2.7 per cent.

Coal miners Whitehaven, Yancoal and New Hope all climbed more than 2 per cent higher as the thermal coal price last high $US134.90 a tonne.

“Futures of thermal coal shipments out of Australia were above $US130 per ton in April, maintaining most of the surge from March as the outbreak of war in the Middle East triggered shortages in energy commodities, favouring coal alternatives.”

Housing tipped to slow

Analysts at Macquarie warned that the weakness in the share market and worries about rising interest rates to contain inflation are likely to spread to the housing market.

“Importantly, households face renewed cost-of-living pressures and higher interest rates, with the Middle East conflict remaining a downside risk. We think dwelling price growth could slow from close to 9 per cent in 2025 to ~2½ per cent in 2026,” it said.

The investment bank also warned that the Middle East war is likely to lift building material costs and slow the pace of new dwelling construction.

Interest rate traders now expect the RBA to lift the cash rate two more times or 50 basis points by September to take it to 4.6 per cent. The chance of a rate increase in May is priced at a 64 per cent probability as at April 10, according to data provided by the Australian Securities Exchange.

Macquarie only expects one more rate increase this year as the economy slows faster than expected.

The Australian dollar fell 0.4 per cent to buy US70.4 cents.