United States
Wall Street took a beating overnight as escalating conflict in the Middle East sent oil prices surging and rattled investor confidence across asset classes. The S&P 500 tumbled 1.4% to 6,624.70, with all 11 industry sectors finishing in the red. The Dow Jones Industrial Average slumped 1.7% to 46,213.01, while the Nasdaq Composite shed 1.5%.
The sell-off came after Israeli strikes on Iran’s South Pars gasfield prompted retaliatory Iranian attacks on Qatari and Emirati energy infrastructure, ratcheting up fears of a broader regional conflagration. Brent crude spiked above US$110 a barrel during the session before settling near US$109.80.
The Federal Reserve held rates steady at 3.5% to 3.75% in an 11-to-1 decision, with Governor Stephen Miran the lone dissenter in favour of a quarter-point cut. Chair Jerome Powell struck a cautious tone, telling reporters that war-related uncertainty was clouding the inflation outlook and that higher energy prices would push up headline inflation in the near term. The Fed raised its 2026 inflation forecast to 2.7% from 2.4%, and notably lifted the core measure to 2.7% as well. Money markets are now pricing barely 15 basis points of easing for the rest of the year, less than a single quarter-point cut.
On the corporate front, Micron Technology warned it would need to spend heavily on production to meet surging demand for memory chips, overshadowing an otherwise upbeat forecast. Macy’s offered a brighter signal for the consumer, projecting stronger-than-expected sales for the current quarter. General Mills missed Wall Street expectations after a decision to lower prices weighed on results, though management flagged the benefits would flow through in coming quarters.
Treasury yields climbed across the curve, with the two-year rising 10 basis points to 3.77% and the benchmark 10-year adding 6.4 basis points to 4.26%.
Europe
European equities erased early gains to close lower as the Middle East conflict dominated sentiment. The Stoxx 600 fell 0.8%, with the majority of sectors posting losses.
Food and personal care stocks led the retreat, with the food sector tumbling 2.9% as heavyweight names including Nestle, BAT and Danone all dropped more than 3%. Utilities shed 2.1%, dragged lower by Enel, National Grid and Orsted, while the healthcare sector fell 1.9% with Roche and Novo Nordisk among the biggest decliners. Technology stocks also struggled, losing 1.5% as Prosus slid 7.4% and SAP dropped 2.9%.
Banks were a rare bright spot, climbing 0.8% as SocGen, CaixaBank and Bawag all advanced. Commerzbank added 1.5% after UniCredit’s chief executive signalled flexibility around a potential deal. Industrials also outperformed, rising 0.3%, with Diploma surging nearly 18% after lifting its full-year forecast.
The energy sector managed a modest 0.4% gain despite the broader risk-off mood, with GTT and Technip Energies both rallying to record closing levels. Construction stocks held relatively firm after Heidelberg Materials jumped 2.5% on a double upgrade from Morgan Stanley. The FTSE 100 in London dropped 0.9% to 10,305.
Australia
Australian shares are bracing for a bruising session, with S&P/ASX 200 futures pointing to an opening fall of around 1.7% to 8,540. Overnight ADR moves suggest the major miners will come under heavy pressure, with BHP’s receipts down 3.1% to an equivalent of $48.53 and Rio Tinto’s off 2.3% to $124.66.
Citi warned that the escalating Middle East conflict could force further Reserve Bank tightening, arguing the March rate hike was primarily driven by geopolitical risk rather than domestic capacity pressures alone. The broker expects a further 0.25 percentage point increase in May and cautioned the terminal rate could push higher if the conflict drags on. That assessment will be tested later this morning when February employment data lands at 11.30am AEDT, with consensus expecting unemployment to hold at 4.1% and jobs growth of around 20,000.
Broker activity was mixed. UBS reshuffled its property calls, upgrading Region Group to buy while cutting Scentre Group to sell and BWP Trust to neutral. Sims drew upgrades from both RBC and Jarden, while Woodside Energy was cut to neutral at Evans & Partners. Woodside also announced the appointment of former Anglo American chief executive Mark Cutifani to its board.
Elsewhere, Lynas Rare Earths achieved first production of samarium oxide at its Malaysian facility ahead of schedule, while Boss Energy lifted the uranium resource at its South Australian satellite deposits by as much as 30%. Orora named Paul Victor as its new chief financial officer.
Australian bond yields fell modestly, with the three-year slipping 3.4 basis points to 4.51% and the 10-year easing 4.2 basis points to 4.90%.
Commodities and Currencies
Oil was the dominant story overnight. Brent crude surged 6.1% to US$109.78 a barrel after Iranian strikes on Qatar’s Ras Laffan LNG complex caused extensive damage to the world’s largest liquefied natural gas export facility. West Texas Intermediate jumped to US$99.22. Iran also issued evacuation warnings for oil facilities across Saudi Arabia, the UAE and Qatar, threatening further strikes.
Gold reversed sharply, falling 3.3% to US$4,841 an ounce as Powell’s hawkish inflation commentary dashed hopes of near-term rate cuts. Iron ore slipped 1.3% to US$107.35 a tonne, while base metals also weakened after Iran vowed to target Gulf energy assets.
The Australian dollar dropped 1% to US70.34 cents as the stronger greenback and risk aversion weighed. The euro slipped 0.6% to $US1.1469 and the yen was little changed at 159.84 per dollar. Bitcoin tumbled 5.1% to US$70,873.
Economic Calendar
AU:
- Employment Change 11:30
- Unemployment Rate 11:30
US:
- Initial Jobless Claims 23:30
- Leading Index 01:00
- New Home Sales 01:00
- Wholesale Inventories MoM 01:00
This article was written by Calvin Curdie, Rivkin Securities Pty Ltd. Enquiries can be made via [email protected] or by phoning +612 8302 3632.
