Australian financial markets were rattled at the start of the week as escalating tensions in Iran triggered a surge in oil prices and sent investors scrambling for safety. A wave of uncertainty swept through trading floors on Monday, pushing the benchmark S&P/ASX 200 sharply lower and reflecting growing fears that instability in the Middle East could disrupt global energy supplies and undermine economic growth. By late morning the index had plunged 3.9 per cent, leaving the market about 7.6 per cent below the record high reached only a week earlier.
The turmoil followed a dramatic jump in crude prices after fears emerged that attacks on key infrastructure and potential production cuts in the Persian Gulf could choke global supply. West Texas Intermediate crude surged by 22 per cent, briefly climbing above $US111 a barrel, its highest level since the early months of the Russia-Ukraine war in 2022.
The spike reverberated across global financial markets. US stock futures slipped while the US dollar strengthened against currencies linked to commodity exports. In Australia, government bond yields also surged, with the 10-year yield rising to about 4.95 per cent as investors sold bonds and repositioned their portfolios.
Analysts warn the situation could pose a greater shock than previous crises if the Strait of Hormuz remains closed. The strategic waterway carries a share of the world’s oil shipments, and estimates suggest as much as 20 million barrels a day could be temporarily removed from the market. The conflict has also expanded beyond energy facilities, with reports of attacks on desalination plants raising concerns about water supply and regional stability.
Economists say the ripple effects may stretch far beyond fuel costs, lifting food prices and disrupting industries that depend on oil and gas byproducts worldwide. Still analysts say markets could rebound if tensions ease.
