The ASX 200 shed $32 billion in its worst session since June as oil surged past $US101 a barrel and Middle East tensions escalated, stoking inflation fears ahead of the RBA's September decision.
Business & Markets Desk is a contributing writer covering business and public affairs for The Sydney Times.
The Australian share market shed $32 billion in its worst session since June, with the ASX 200 closing down 1.8 per cent at 8,752 points. The slump came as oil surged past $US101 a barrel and escalating Middle East tensions stoked inflation fears ahead of the Reserve Bank's September rate decision.
The ASX 200 had earlier shed as much as $50 billion during the session before recovering some losses by the close. Every sector of the ASX ended in the red and 148 of the top 200 companies were down. The Australian dollar traded at 72.1 US cents, while Brent crude settled at $US101.61 per barrel.
The oil price spike followed the largest exchange of tanker attacks between Iran and the United States, with traders also assessing reports of hits on Saudi Arabian oil infrastructure on the Red Sea. The escalating conflict in the Middle East has driven crude prices sharply higher throughout September, adding to an already difficult inflationary backdrop.
Higher fuel costs are driving up inflation, which could force central banks including the RBA to push rates further. The likelihood of the RBA lifting interest rates in September has risen to 63 per cent according to the latest market pricing. The ASX has fallen for three of the past four weeks after reporting season revealed a K-shaped market, with miners outperforming while economic worries weigh on earnings expectations elsewhere.
The oil shock has triggered a broader bond market selloff, with yields climbing as traders ramp up bets of an RBA rate rise. The global bond storm has put two RBA rate rises on the table, with the vast majority of economists predicting the RBA will lift rates once before Christmas.
The June quarter GDP figures came in hotter than expected, and the figures showed the economy had delivered zero net productivity growth since 2019. This combination of stagnant productivity and rising inflation has created a challenging environment for both policymakers and investors.
The ASX is now at its lowest level in two months. The escalating US-Iran conflict and the oil price trajectory will remain the dominant drivers of market sentiment in the coming weeks. The RBA's September 29 decision will be the next major catalyst, with the Board facing a difficult balancing act between supporting a slowing economy and containing inflation pressures driven by energy costs.
According to the Australian Bureau of Statistics, the number of people working multiple jobs has risen to its highest level since 1994, underscoring the cost-of-living pressures that are weighing on consumer sentiment. The Reserve Bank of Australia's August Statement on Monetary Policy noted that the economy is growing below trend, but services inflation remains elevated.
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