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As I write this I am on a train getting ready to race back to my apartment to back a bag to jump on a plane to Darwin and so today’s gonna be short. While I like to stay zoomed out, I’m breaking that rule today, and besides: there’s enough to talk about locally.
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While I expect a market recovery to eventually kick in – I was caught out this week buying a geared ETF trying to ride the market the way back up, like a lot of other people, I’ve gone and misjudged how impactful this Iran war has, will, and still can be – it looks like we might have more pain.
Take Coles and Virgin for instance. Both companies have suggested Australians should brace for more rate hikes as the increasing price of oil causes a domino effect into everything else, the worst case scenario is that Australians get food inflation.
At this point, that’s looking likely.
Not only because of the cost of diesel and aviation fuel, but also fertiliser costs – yes, Iran has disrupted those too. Long story short, fertiliser costs are rising, that means fruit and veg costs more, then the cost of transporting it.
Virgin rising flight prices might be more welcome. Morgan Stanley, meanwhile, has pointed out that due to Australia’s lack of refining capacity and relative distance from the Strait of Hormuz, we are ‘first in line’ to see the worst of the impact this modern oil crisis is having.
And the XJO is down -8% since the war started a little under three weeks ago, so, they’re probably onto something.
(I would like to have a word with Goldman Sachs whose analysis this whole thing would blow over in two weeks I let anchor my expectations; then again, I probably should have considered they wrote that before Iran bombed Qatar’s LNG industrial assets.)
To make matters worse, as if we needed another blow: the RBA raised hikes this week! On the day it happened, the XJO actually finished contrarian green.
In retrospect, this looks like a hiccup in the zeitgeist – because while I suggested that might have indicated the recovery was in, well. Who’s laughing now? (It’s not me.)
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