After a roller coaster week, the Australian share market closed on a particularly weak note, losing almost $50 billion of value after some renewed hostilities between the US and Iran flipped optimistic sentiments about the war into deep pessimism.
The renewed skirmishes — during which the US intercepted Iranian attacks and launched retaliatory strikes on Iranian military sites — sent the oil price higher and the Australian market diving sharply lower.
By the close of trade on Friday the ASX 200 was down 1.5% or 133.7 points, to 8744.4 points, with only one of the 11 market sectors rising.
Although there was a significant 1.5% fall, the market was still up for the week
Despite the significant fall on Friday – the biggest since March 19 when the market hit recent lows – the index was still up 0.2% for the week.
That reflected optimism earlier in the week that the war could getting close to a resolution and that the oil tankers could soon resume steaming through the Strait of Hormuz – a prospect that looks less likely in the near term now.
With the price of Brent crude once again rising above the $US100 mark, some of the more important market sectors got hammered.
Banks hit hard Financials were the hardest hit sector with Westpac (ASX: WBC) shares slumping a hefty 4.8% to $37.44 after it started to trade without its dividend. Shares in National Australia Bank (ASX: NAB) fell 2.9% to $38.36, with market leader Commonwealth Bank shares (ASX: CBA) shedding 1.9% to $175.91 and ANZ shares (ASX: ANZ) losing 1.5% to $36.79.
With interest rates rising rapidly, analysts are concerned that lending losses will start to pose challenges for the banks and reduce their profits. The best performer among the banks was Macquarie (ASX: MQG), which still ended down 1.1%, to $239.23 after it reported a better result than analysts had predicted.
Annual profit was up 30% to $4.85 billion and its second-half profit was a 17% better than analysts had predicted, but it was still not enough to prevent a fall.
Tabcorp shares a losing gamble It was a terrible week for shareholders in Tabcorp (ASX: TAH) after AUSTRAC launched a money laundering probe into the gambling company.
Shares dived a massive 14.2% to 75.5¢ on Friday, which followed a 23.5% drop during Thursday's trading.
Understandably, investors are wary about a long period of uncertainty surrounding the company and the possibility of massive fines if any misbehaviour comes to light.
There may have been some switching going on as well, with shares in gambling company Light & Wonder (ASX: LNW) up the most on the market, adding 11.7% to $114.64.
Energy stocks lower despite oil price rise
Emphasising the uncertainty about which way the war might be headed, energy stocks were largely down despite the bounce in the oil price. Shares in Woodside Energy (ASX: WDS) fell 1.4% to $30.05 and Santos shares (ASX: STO) dropped 1.4% to $7.52.
News pumps up communications
Amid a sea of gloom across the market, communications was the only sector to record a rise, largely on the back of a 2.6% share price rise for News Corp (ASX: NWS) to $43.17 after it announced a better than expected third quarter result, with revenue and pre-tax earnings both surprising on the upside. News's majority ownership in digital real estate advertiser REA Group (ASX: REA) helped, with shares in REA rising 1.4% to $176.89 after it reported double-digit revenue growth in Australia and lowered cost guidance for the 2026 fiscal year. International insurer QBE Insurance (ASX: QBE) shares fell 1.6% to $22.30 after admitting to a direct exposure to the Middle East conflict of US$60 million and reaffirming its guidance for the current financial year.
The week ahead
While progress towards peace in the Middle East remains a major influence, another significant development in the coming week is the release of the Federal Budget on Tuesday.
This year’s Budget could have a stronger market impact than usual, as it is expected to outline a less generous approach to capital gains on assets such as property and shares, and introduce changes to negative gearing arrangements.
Although the market is well informed about the general direction of these changes, the precise details will be crucial in determining how the market reacts to higher taxes on capital gains.
Budget changes and forecasts will be vital
Treasury’s forecast for the economy will be closely watched, as it may continue to change up to the last moment due to significant global uncertainties that could adversely affect Australian living standards.
With the Reserve Bank raising interest rates, uncertainty about the future direction of the Australian economy remains a key concern.
There are also some earnings updates from ASX companies this week that investors will be tuning in for, including Dyno Nobel, Coronado Global Resources, Life360, GQG Partners, NexGen Energy, Westgold Resources, Commonwealth Bank, Aristocrat Leisure, Accent, Xero, GrainCorp and Auckland Airport.
New head for the Fed and higher inflation
It is a big week for US news too with the Senate expected to confirm the appointment of Federal Reserve Chair-designate Kevin Warsh.
If he clears that hurdle, Warsh will replace Jerome Powell as the Federal Reserve Chair, although Powell has indicated he will remain on the board until he is fully cleared of any investigations of impropriety concerning building renovations at the Fed.
US inflation figures will be released on Tuesday, with most analysts predicting a year-on-year rise of 3.8% as higher oil prices from the Iran conflict affect prices.
Trump is heading to China for vital talks
US President Donald Trump is also scheduled to meet Chinese President Xi Jinping during a visit to Beijing this week.
They are expected to discuss stabilising ties, with trade and technology disputes at the forefront as the US wants better access to the Chinese market and access to rare earths at the same time as China is pushing for lower trade barriers and relief from curbs on the import of some semiconductors.
