Australia’s share market headed for a poor final session of the week after US markets fell on weaker chip stocks and amid escalating conflict in the Middle East. The benchmark index fell 1.4 per cent as Brent crude hovered near $US85 a barrel, supporting strong performances from Woodside, Santos, Viva and Ampol. The geopolitical tensions in the Middle East have injected fresh volatility into global financial markets, with investors adopting a more cautious stance. The escalation of conflict between the United States and Iran has raised concerns about potential disruptions to energy supplies and broader economic stability, prompting a flight to safe-haven assets such as gold and government bonds.
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The Australian dollar is buying 69.83 US cents, down from 70 US cents on Thursday at 5pm, reflecting the broader market sentiment. The weaker currency offers some support for exporters but also adds to imported inflation pressures, particularly for fuel and other commodities priced in US dollars. The recent oil shock has led to falls in Australia’s consumer and business confidence, though so far there are few signs of a marked slowdown in activity, according to a senior central banker. The resilience of the economy in the face of external shocks has been notable, though risks remain elevated and the potential for a sharper downturn cannot be discounted.
The share market decline was broad-based, with technology stocks particularly affected by the weaker sentiment in US markets. Chip stocks led the losses after disappointing earnings reports from major US semiconductor companies, with the Nasdaq composite dropping more than 2 per cent overnight. Energy stocks, however, bucked the trend, benefiting from the higher oil prices resulting from Middle East tensions. The mixed performance across sectors reflects the divergent impacts of the current geopolitical environment on different parts of the economy. Miners also struggled, with iron ore prices slipping on concerns about slowing demand from China, Australia’s largest trading partner.
