The U.S.-Israeli-led pre-emptive strikes on Iran have seen Iran fire missiles at every other non-Shia Muslim country hosting United States bases as the country continues to throw a generational tantrum (probably not without good reason, either, given its peak dictator was killed, but still, boo-hoo.)
Listen to the HotCopper podcast for in-depth discussions and insights on all the biggest headlines from throughout the week. On Spotify, Apple, and more.
Unfortunately, Iran’s retaliatory pan-Arab tantrum has effectively led to a situation where the Strait of Hormuz is unusable, so there goes a lot of Saudi crude heading into world markets. (Saudi Arabia is a Sunni muslim country.)
At the same time, strikes on oil and gas infrastructure all across the region – just know there have been plenty, a blow-by-blow isn’t required here – have also massively put out MENA crude oil output. Iraq, for instance, has lost the ability to produce 3MMbblpd into world markets.
In fact, the disruption we’re seeing in Brent (which is also hitting America’s WTI benchmark) is outsizing that we saw at the start of the Ukraine-Russian war – not so much in terms of volatility, but in realised loss of oil supply globally.
Add all of that in with the fact that U.S. futures are flashing steeply red; that Wall Street already closed red on Friday, that U.S. debt is continuing to climb, that gold prices have apparently hit a ceiling (as far as black swan events can push the metal higher), that investors are heading back for safe-haven bonds, and that the Australian market acts in deference to the U.S.
The sum of all those inputs? Well, at one point on Monday before the afternoon rolled in, the ASX200 (or XJO if you prefer) actually dropped below -4% in a single session, marked by an intraday low below 8,500pts.
But there is good news: as of 2pm AEDT, those losses have pared off; as at 2.04pm AEDT, the XJO is down -3.58% at 8,534pts. So at least complete chaos didn’t make itself felt – spare a thought for South Korean investors who saw the KOSPI shed twelve percent in one trading session last week.
It’s a dangerous time to be in an expensive market, and apparently, we’re suffering from that equation too. But is a -4% drop an overreaction? In this finance journalist’s view, yes.
It’s a good day, at least, to be shorting via ETFs. Betashares’ BBOZ ETF, which goes up when the overall market goes down, has jumped +8% on Monday.
They say there’s a three-day rule around black swan events, and it appears on Monday oil hitting the triple digits is itself the black swan event the market’s reacting to.
Well, that, and an upcoming wall of inflationary pressure that could put us back to CY23. What a time to be alive – but hardened market watchers (read: traders) will be waiting for the wind to shift to ride the recovery upward.
When might that be? Who knows. Keep an eye on HotCopper news.
Join the discussion: See what’s trending right now on HotCopper, Australia’s largest stock forum, and be part of the conversations that move the markets.
The material provided in this article is for information only and should not be treated as investment advice. Viewers are encouraged to conduct their own research and consult with a certified financial advisor before making any investment decisions. For full disclaimer information, please click here.