After the third consecutive weekly loss, the ASX has now lost 8.4% since the start of the war between Israel, the US and Iran.
With energy costs from the Middle East conflict continuing to rise, markets have also been hit with increasing interest rate expectations as central banks, including the RBA, the US Fed, the European Central Bank, and the Bank of England, have all talked tough about raising interest rates to suppress inflation.
By the close of trade on Friday, the ASX 200 Index had fallen by 69.4 points, or 0.8%, to 8428.4 points.
That meant the index was down 2.2% for the week and a full 8.4% since the conflict started on February 28.
Three more rate rises priced in
Analysts are now pricing in three more interest rate rises by the Reserve Bank of Australia, which would take the cash rate to 4.85% this year, making it the highest cash rate since November 2008.
Hawkish messaging from the US Federal Reserve, European Central Bank and Bank of England led to speculation of the end of rate cuts in the US and further rate hikes elsewhere.
Gold stocks hit hard
Gold mining shares were particularly hard hit by rising inflation and lower chances of a US rate cut, with gold prices down the most since the onset of COVID-19 five years ago. That sent gold mining shares down sharply with Greatland Resources shares (ASX: GGP) down 7.3 % to $10.11, Ora Banda Mining (ASX: OBM) shares down 7.8% to $1.18 and Newmont (ASX: NEM) down 2.6% to $142.46 and Northern Star shares (ASX: NST) down 2.4% to $18.50.
Big miners hit
The big miners were also slammed by falling copper prices with BHP shares (ASX: BHP) down 1.8% to $47.47 and Rio Tinto shares (ASX: RIO) falling 2.9% to $146.92.
Despite the price of Brent crude falling 2.5% to $US106.60 a barrel after Israeli Prime Minister Benjamin Netanyahu said the country would no longer target Iranian energy infrastructure, oil stocks were mixed after the long-term oil infrastructure picture darkened and estimates to repair Qatar gas production infrastructure were put at several years.
Woodside Energy shares (ASX: WDS) were up 1% to $34.04 while Beach Energy (ASX: BPT) shares fell by 1.2% to $1.27 and Santos shares (ASX: STO) fell 0.5% to $7.98.
A decision by the Albanese government to increase domestic refinery payments saw Ampol shares (ASX: ALD) rise 0.4% to $33.11 while Viva Energy (ASX: VEA) shares dropped 2.9% to $2.36.
Coal rises as gas tightens
The damage to the Qatari LNG infrastructure was positive for energy alternatives with coal miners rising. Yancoal shares (ASX: YAL) rose 3.5% to $8.31 while Whitehaven Coal shares (ASX: WHC) rose 3.9% to $9.30.
Solomon Lew’s Premier Investments shares (ASX: PMV) dropped 4.3% to $11.98 after it reported a mixed first-half result, with strength in Peter Alexander offset by a double-digit sales decline at Smiggle which is in the process of reformatting.
Airline shares hit
Shares in domestic airline Virgin Australia (ASX: VGN) dropped 5% to $2.45 after it said it was preparing to increase airfares by about 5% to cope with higher costs and tight fuel supply. Virgin shares have now lost around 24% since the start of the oil crisis, while Qantas shares (ASX: QAN) fell a further 1% to $8.34. Shares in supermarket giant Coles (ASX: COL) gained 0.9% after it decided to change the frequency of fuel levy reviews from monthly to fortnightly due to oil price volatility. After heavy initial losses, shares in Electro Optic Systems (ASX: EOS) bounced back to close up 2.6% to $9.90 after confirming chief executive Andreas Schwer had sold 1.5 million shares, although no further sales are planned. Humm shares (ASX: HUM) dropped 2.8% to 72c after former chairman Andrew Abercrombie applied to the Takeovers Panel for a review of its decision to declare unacceptable circumstances, after finding he and the board repeatedly misled investors about a $385 million bid from rival Credit Corp.
The week ahead
Apart from Iran war developments, one of the main focus points in Australia will be the release of the Consumer Price Index on Wednesday.
Forecasts have it rising to 3.9% for the year to February, up from 3.8% in the previous month, which would reinforce the recent RBA decision to raise interest rates.
This figure will not include the fast-rising energy prices since the Iran war; these developments will only heighten concerns about higher inflation and push towards another interest rate rise in May.
The other big domestic factor will be the payment of a host of large dividends during the week, including from BHP, Woodside and Bluescope, which may result in cashed up investors looking to pick up some bargains.
In the US the main news will be the purchasing manufacturing index and jobless claims.
