Global markets remain on edge after Iran attack as oil rises — as it happened

Global markets are on edge following the recent US attack on Iran, with the ASX 200 closing down 0.4% and the Australian dollar weakening, reflecting broader risk aversion. Brent crude oil prices rose 1.4-2.7% to around $78/barrel, as analysts warn of potential significant price spikes and inflationary pressures if Iran disrupts the critical Strait of Hormuz, which could mute global economic growth given limited OPEC spare capacity. Despite relatively muted equity market reactions thus far, the primary concern remains the potential for severe oil supply shocks.

Analysis

Global markets are exhibiting a cautious stance, pricing in elevated geopolitical risk following the US attack on Iran, though without panicking. The ASX 200's modest 0.4% decline and a 0.6% fall in the Australian dollar to 64.13 US cents reflect a risk-off sentiment, yet the reaction remains contained. The primary concern is the oil market, where Brent crude rose 1.4% to US$78.09 a barrel after an initial spike above $80. Analysts highlight a significant tail risk, noting that a potential Iranian disruption of the Strait of Hormuz could represent a supply shock three times larger than previous crises, as OPEC's spare capacity is also at risk. Locally, the Australian economy presents a mixed picture; the S&P Global PMI hit a 3-month high of 51.2, indicating an expansion in business activity, but this is contrasted by a Fitch report showing a sharp rise in 30+ day mortgage arrears to 1.36% in Q1, a jump nearly triple the historical average. On the corporate front, specific equities are moving on idiosyncratic factors. Metcash posted strong results with a 10.1% increase in statutory profit, leading to a 2.7% share price gain. Conversely, ANZ fell 0.6% on a UBS downgrade. In the tech sector, Tesla's launch of a small-scale robotaxi service in Austin is a significant milestone, with a Wedbush analyst calling it the beginning of a '$1 trillion autonomous journey', underscoring the market's focus on long-term technology narratives amidst short-term geopolitical uncertainty.

Key Decisions for Investors

• Investors should closely monitor Brent crude prices and geopolitical developments in the Middle East, as the potential for a severe supply shock from the Strait of Hormuz constitutes the most significant near-term risk to global inflation and growth.
• The divergence between Australia's expanding business PMI and sharply rising mortgage arrears suggests a bifurcated economy; therefore, preference should be given to companies with resilient earnings and strong balance sheets, such as Metcash, over those highly sensitive to consumer stress.
• Tesla's successful robotaxi trial launch validates a key part of its long-term AI and autonomy thesis, suggesting that investors may need to re-evaluate the company based on its software and AI potential, not just as a vehicle manufacturer.
• Pay attention to company-specific risks, such as the UBS downgrade impacting ANZ and the deforestation financing allegations against NAB, as these factors are driving performance independently of the broader market macro-environment.