The price of oil will spike as markets open and could even soar beyond $US100 a barrel after the Trump administration’s intervention into a weeks-long war between Israel and Iran unsettles financial markets.
While the price of Brent crude has drifted more than 10 per cent higher since Israel first launched an attack on Iranian nuclear assets two weeks ago, traders fear US President Donald Trump’s authorisation of bombing at the weekend will lead to a rapid escalation in the conflict.
In particular, traders are worried that Iran could constrict travel through the Strait of Hormuz, a key shipping route for oil that connects the Persian Gulf and the Gulf of Oman. If this closes, prices could increase significantly, pushing inflation higher and disrupting expectations that central banks including the Reserve Bank of Australia will keep cutting rates.
“For markets, this shatters the illusion of containment. What was a regional proxy conflict is now a high-stakes, US-driven air war targeting [weapons of mass destruction] infrastructure – with unpredictable spillovers across energy markets, global shipping lanes, and risk sentiment,” wrote SPI Asset Management’s Stephen Innes of the bombing of nuclear facilities.
“This is no longer a waiting game – it’s a market moment that demands positioning, not passivity,” he said in his Dark Side of the Boom newsletter.
The S&P/ASX 200 is priced to open 0.2 per cent lower on Monday, although those futures were set before the weekend strikes. Wall Street had ended the last week mostly lower, although traders had hedged their bets and markets had remained largely flat for days. The S&P fell 0.2 per cent, while the Dow and the Nasdaq rose 0.1 per cent and 0.2 per cent respectively. The ASX 200 eased 0.5 per cent last week, the first weekly drop in three months.
