ASX sinks 2.9pc in $90b wipeout as oil soars to $US115

The Australian sharemarket erased by about $90 billion on Monday after the Iran war sent oil prices surging nearly 30 per cent as major producers scaled back production due to disruption in the key Strait of Hormuz.

The spike in crude prices towards $US120 a barrel triggered a sharp sell-off across Asia-Pacific equities and forced circuit-breakers in South Korea amid fears the conflict would reignite inflation, damage global growth and push central banks to raise interest rates again.

The S&P/ASX 200 slumped 2.9 per cent, or 252 points, to 8599, after sliding as much as 4.3 per cent to 8457.20. It was the index’s worst session since US President Donald Trump’s “liberation day” tariffs rattled markets last April.

‘Violent reaction’

Crude oil surged 27 per cent to $US117.70 a barrel at the close – the highest level since Russia’s invasion of Ukraine in 2022 after the Strait of Hormuz, a crucial shipping lane for about a fifth of the world’s crude, has been disrupted since the US and Israel started bombing Iran over a week ago.

Adding to jitters was confirmation that the son of Ayatollah Ali Khamenei would succeed his father as Iran’s supreme leader after the latter’s death.

“The violent reaction stems from markets seeing no obvious off-ramp in the escalating Middle East conflict, now a high-stakes stand-off where neither side appears willing to blink first,” IG market analyst Tony Sycamore said. “We’ve repriced in one day what most people thought would take a month to do.”

Sycamore said if oil broke above $US130 a barrel it could climb towards $US150, adding rising crude prices were a bad situation for the economy given the global impacts.

Bond traders rapidly repriced the prospect of higher interest rates in Australia. The Australian three-year government bond yield – often used to gauge expectations for rates – jumped to the highest in a decade, while the 10-year yield breached 5 per cent.

On the ASX, energy rallied on higher oil prices with Woodside up 2 per cent to $31.36, Karoon Energy 10.2 per cent to $2 and Santos 2.4 per cent to $7.64. It came as Santos and Beach Energy confirmed they would proceed with the Moomba Central Optimisation project in South Australia’s Cooper Basin.

Coal miners rallied as markets sought alternative energy supplies, with Yancoal up 13.3 per cent to $7.17, and Whitehaven Coal 4.4 per cent to $8.85.

Elsewhere, it was a sea of red. Materials tumbled 5.7 per cent as BHP dropped 5.1 per cent to $50.10, down about 15 per cent in the past week amid a stand-off with China. Rio Tinto fell 3.8 per cent to $152.68 and Fortescue 1 per cent to $19.05.

Northern Star slid 6.2 per cent to $25.31 and Newmont dropped 3.3 per cent to $159.75 as rising interest rate bets pushed gold down 1.4 per cent to $US5098 an ounce.

Among the banks, National Australia Bank dropped 1.6 per cent to $46.08, Commonwealth Bank 1.8 per cent to $169.45, ANZ 2.3 per cent to $36.78, and Westpac 2.2 per cent to $40.10 as investors dumped risk assets.

And interest-rate-sensitive stocks were also hit, with property giants Scentre down 3.6 per cent to $3.50 and Mirvac 2.9 per cent to $1.84. Kmart owner Wesfarmers fell 1.9 per cent to $74.37 and data centre operator NextDC slumped 6.4 per cent to $12.81.

Stocks in focus

In corporate news, DigiCo Infrastructure REIT fell 7.4 per cent to $1.88 after chief executive Michael Juniper said he would take extended personal leave to spend time with family and address a personal matter. Chris Maher was appointed interim chief executive.

Dyno Nobel slumped 9.7 per cent to $3.06 after agreeing to sell its Phosphate Hill fertiliser business to Mayfair Australia for nominal consideration of $1, completing its exit from fertilisers to focus on explosives.

Pro Medicus fell 0.9 per cent to $131.50 after signing two five-year contract renewals in the US with a combined minimum value of $40 million through its subsidiary Visage Imaging.

Nanosonics gained 3.8 per cent to $3.57 after receiving US Food and Drug Administration 510(k) clearance for expanded endoscope indications for its Coris system.