Australian shares suffered their worst single-day drop since Donald Trump's 'liberation day' tariffs last year, with the benchmark S&P/ASX 200 closing down 2.85% on Monday. The sell-off wiped approximately £90bn from the value of the ASX, triggered by a sharp rise in oil prices amid escalating violence in the Middle East.
Global oil prices surged past US$100 a barrel shortly before the Australian market opened, stoking fears of a breakout in global inflation. The energy price shock followed a weekend of intensified conflict, raising concerns about a sustained supply crunch that has propelled crude prices to their highest level in four years.
Archival Garcia, chief executive of Melbourne freight technology company Fluent Cargo, warned that the market fallout extended beyond energy markets. 'Fuel costs rise, war-risk insurance premiums increase, vessels slow or reroute, and freight rates climb – particularly across energy-dependent supply chains,' he said.
The ASX was a sea of red, with 10 out of 11 sectors falling, led by the mining-heavy materials sector which closed down more than 5%. The energy sector was the only one in green, having profited from the upheaval. The market staged a recovery during afternoon trading after initially falling more than 4%.
Tony Sycamore, market analyst at IG Australia, noted that 'local markets are mirroring the intense global risk-off mood.' He also pointed out that the Reserve Bank's aggressive stance against inflation through anticipated rate rises added downward pressure. If the RBA raises rates at its March meeting, many Australians will face increased mortgage costs alongside rising petrol and household expenses, hampering spending.
