Australian sharemarket bloodbath: Almost $100billion wiped out
The Australian sharemarket sank 3.3 per cent, with nearly $100billion wiped out at the open.
The S&P/ASX 200 Index plunged 274.20 points to 8576.80 on Monday, marking the lowest it has traded since mid-December.
Crude oil surged to its highest level since Russia invaded Ukraine in 2022, with prices surging as high as USD$110 a barrel.
The dip in the ASX comes after Iran announced its new Supreme Leader – the son of the late Ayatollah Ali Khamenei.
Capital.com senior market analyst Kyle Rodda warned the surge in oil prices would have an impact on inflation, interest rates and more.
‘The scale of the move means everything will have to re-price,’ he said.
Iran has effectively shut down commercial traffic through the Strait of Hormuz, the narrow shipping corridor that carries around 20 per cent of the global oil trade, using drone strikes and explicit military threats to deter vessels, even as the US continues to strike its naval assets.
If shipping is disrupted for a month, Westpac warns Brent crude could spike to US$113 a barrel. In a severe scenario where the strait remains blocked for three months or longer, prices could surge to US$185 a barrel.
Crude oil surged to its highest level since Russia invaded Ukraine in 2022, with prices surging as high as USD$110 a barrel (pictured, drivers queuing at a service station in Sydney last Tuesday)
Oil prices have risen due to disruptions in the Strait of Hormuz, with Iran blocking access following US-Israel airstrikes on the nation (pictured, an oil depot up in flames in Iran)
‘The longer and more intense the disruption, the greater the real economy cost and hit to sentiment,’ Westpac said.
For Australian motorists, that could mean petrol prices rising between 25 cents and $1 a litre, depending on the Australian dollar and refinery margins. At the top end of that range, fuel could exceed $3 a litre in many cities.
Adding to market pressures, China has set its lowest economic growth target in decades, 4.5 to 5 per cent, threatening to hit Australian mining companies hard.
China buys about 70 per cent of Australia’s iron ore exports and remains the country’s largest trading partner.
This year’s target is the lowest since 1991, according to AFP research, with the only exception being 2020 when no target was set during the Covid‑19 shock.
The sharemarket bloodbath on Monday comes after the ASX fell sharply at the open on Friday, dropping 1.4 per cent and wiping out $40billion.
Meanwhile, surging bond yields have pushed investors to bet on more than two RBA rate hikes this year, and all four big banks expect another cash rate rise in May.
‘The risk of an ongoing and intensifying supply shock that heavily disrupts energy markets and leads to higher inflation and weaker economic growth has risen,’ Capital.com senior market analyst Kyle Rodda told the AFR.
Two more 0.25‑point RBA rate rises would add roughly $180-a-month to repayments on a $600,000 mortgage with 25 years remaining, based on Canstar’s estimate.
more to come
