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Global financial markets experienced significant volatility over several months, driven by geopolitical tensions in the Middle East, fluctuating oil prices, and shifting investor sentiment regarding technology stocks.
Geopolitical Context and Oil Prices
Conflict and Ceasefire Developments
The conflict in the Middle East, involving the United States, Israel, and Iran, escalated in late February. Key events included US attacks on Iran's Kharg Island and Iran's actions against commercial shipping in the Strait of Hormuz, a strategic waterway for global oil transit. Iran reportedly fired on commercial ships and seized at least two vessels, halting traffic through the strait for a period.
Market sentiment fluctuated based on reports of potential diplomatic resolutions. At various points, reports emerged that the US had presented a plan to pause the conflict, although Iran's foreign minister stated the government had not engaged in peace talks. Later, regional officials stated the US and Iran had an "in principle agreement" to extend a ceasefire.
Oil Price Impact
Oil prices reacted strongly to these events. Key price points recorded include:
- Brent crude oil: Settled at $98.48 per barrel (up 3.1%) early in the conflict; climbed 9.2% to $US100.46 per barrel; later rose to $107.38 per barrel (up 3.8%); subsequently fell over 4% on ceasefire hopes; and eventually settled at $94.93 per barrel.
- West Texas Intermediate (WTI) crude: Rose 9.7% to $US95.73 per barrel; later advanced to $US98.60 a barrel.
The International Energy Agency (IEA) announced that its members would release 400 million barrels of oil from emergency stockpiles in response to supply concerns. Regional oil producers reduced output due to transportation challenges related to the Strait of Hormuz closure. Rystad Energy reported that over 12 million barrels of oil equivalent per day were taken offline in just over a week.
Australian Sharemarket (S&P/ASX 200)
The S&P/ASX 200 index recorded numerous daily movements during this period, reflecting changing market conditions. It declined to 8503 points (down 1.6%) and later to 8379.4 points. The market subsequently surged 1.85% to 8,534.3 points following reports of potential ceasefire discussions. The index later rose to 9107.4 points (up 1.1%) and closed at 8960 (down 0.14%). On one day, it closed at 8955 (down 0.26%), with six of 11 sectors finishing higher.
The Australian dollar traded between approximately US68.95¢ and US71.70¢ during the period, with the higher level being its strongest since June 2022.
"Periods of market weakness are an inevitable part of the investment journey... many members, including older ones, can afford to remain patient." – Mano Mohankumar, Chant West
Sector-Specific Performance
Energy Stocks
Energy stocks generally rose in line with oil price increases. Company movements included:
- Woodside Energy: Rose 1%, 0.3%, 1.3%, and 4.8% on different days.
- Santos: Rose 3.1%, 1.3%, 2.1%, and 4.5% on different days.
- Ampol: Rose 1.8% and 5.4%; closed flat on one day; closed 0.15% higher on another.
- Viva Energy: Increased 12.1% on one day; later entered a trading halt following a fire at its Geelong refinery.
- Coal producers Yancoal and Whitehaven saw gains, but also recorded declines of 3% and 3.2% respectively on a separate day.
Technology Stocks
Technology stocks experienced significant volatility, with the S&P/ASX 200 Information Technology Index falling over 40% in a six-month period. Concerns centered on stock valuations, the profitability of artificial intelligence (AI) capital expenditure, and the potential for AI to replace software-as-a-service (SaaS) business models. Analyst Ron Shamgar of Tamim described the core concern as AI agents eroding seat-based pricing models.
Key company movements included:
- WiseTech Global: Rose 4.3%, 11% (after reporting 76% revenue surge), and 12.36%; fell 1.6%, 2%, 2.5%, and 4.2% on different days.
- Xero: Fell 1.4%, 1.9%, 1.9%, and 2.6% on different days; rose 9% on another.
- TechnologyOne: Surged over 20% after upgrading guidance; fell 2.2% and 2.6%; rose 6.14% on another day.
- Life360: Share price jumped 27% on January 23 after a positive trading update.
- ASX 200 Information Technology Index: Gained 7.4% on one day.
Mining and Materials Stocks
Mining stock performance was mixed. The basic materials sector increased by over 4% on one day. Individual stocks recorded:
- BHP Group: Rose 0.8%, 2%, 2.2%, and 3.3%; fell 0.34%, 1.2%, 2%, and 3.3% on different days.
- Rio Tinto: Rose 0.6%, 0.7%, 1.4%, 1.6%, and 1.8%; fell 0.7%, 2%, and 2.9% on different days.
- Fortescue Metals Group: Rose 1.01%, 1.1%, and 1.3%; fell 1%, 2.3%, and 3.9% on different days.
- Gold miners: Northern Star Resources and Evolution Mining recorded both gains and losses. Northern Star fell as much as 14.3% (after indicating challenges in meeting production guidance) and 8.6%. Evolution Mining fell 8.3% and 4.15% on different days.
Financial Stocks
Major banks showed mixed results. On various days:
- Commonwealth Bank (CBA): Rose 0.7%, 1%, and 1.4%; fell 0.1%, 0.3%, and 2.77%.
- Westpac: Rose 0.3%, 0.5%, and 0.8%; fell 0.2%, 0.8%, and 1.65%.
- National Australia Bank (NAB): Rose 0.2% and 3%; fell 0.1%, 0.4%, and 2.49%.
- ANZ Group: Rose 0.4%, 0.5%, 0.7%, 0.8%, and 2.3%; fell 1.28%.
Other Notable Stocks
- Qantas: Shares decreased 0.8% after announcing a $105 million settlement for a class action related to COVID-era flight cancellations; rose 4% on another day.
- Virgin Australia: Rose 11.5% on one day.
- The Star: Shares slumped 11% despite reporting $301 million in revenue.
- Pepper Money: Surged 25.6% after a takeover bid from Challenger.
- Telstra: Reported an 8.1% rise in half-year profit to $1.2 billion.
- Wesfarmers: Share price declined 4.6% despite reporting a 3.1% sales increase and 9.1% profit rise.
- Zip: Shares decreased over 37% following first-half results.
US and International Markets
Wall Street Indices
US markets experienced volatility. On different days, the S&P 500 fell 0.6%, 1.4%, 1.5%, 1.7%, and 0.1%; it also rose 0.5%, 0.6%, 0.8%, and 2%. The Dow Jones fell 0.6%, 1%, 1.6%, and 469 points; it rose 0.1%, 0.3%, 0.7%, and 2.5%. The Nasdaq composite fell 0.6%, 0.7%, 0.9%, 1.5%, 1.8%, 2.4%, and 0.7%; it rose 0.8%, 2.2%, and 0.8%.
Federal Reserve Policy
The US Federal Reserve maintained its main interest rate. Federal Reserve Chair Jerome Powell stated that higher energy prices would contribute to overall inflation and advocated for mildly restrictive US interest rates. Fed officials projected one more rate cut by the end of 2026. Wall Street traders' expectations for a rate cut in 2026 fell to a 49% probability, down from 95% a month prior.
International Indices
- European markets: Stock indexes fell.
- South Korea's Kospi index: Rose 2.7%.
- Japan's Nikkei 225: Increased by 2.9%.
- MSCI All Country World Index: Rose 0.3% to a record high.
Bond and Currency Markets
- US 10-year Treasury yield: Rose to 4.43% from 3.97% before the conflict; later fell to 4.26% and 4.23%.
- Gold: Rose 1.8% to $US4,979.80 per ounce and 3.4% to $US4,552.30 per ounce; also declined on some days.
- Bitcoin: Fell nearly 6% toward $US84,000; later recovered above $US70,000.
Economic Indicators
Australia
- Unemployment rate: Remained at 4.1% in January; rose to 4.3% in February; remained at 4.3% in March. The country gained over 50,500 full-time jobs in January, offset by a reduction in part-time workers.
- Inflation: The Consumer Price Index rose 3.7% in the year to February, a 0.1% decrease from the previous month.
- Reserve Bank of Australia: The RBA was scheduled to announce an interest rate decision, with money markets pricing in a likely rate increase and several economists predicting a rise.
United States
- Inflation: Increased in January, with prices rising 2.8% compared to the previous year (excluding food and energy, core prices rose 3.1%, the highest in nearly two years). US wholesale inflation accelerated to 3.4%.
- Consumer spending: Increased by 0.4% in January.
- Consumer sentiment: University of Michigan's consumer sentiment gauge declined to its lowest reading of the year.
- Economic growth: US economic growth in the October-December quarter was downgraded to a 0.7% annual rate.
- Unemployment benefit claims: Slightly increased but remained historically low.
Superannuation Fund Performance
Australian superannuation funds experienced a decline in March following gains earlier in the year. Chant West reported the average median growth fund returned 1.1% in February after a 0.4% gain in January. Funds subsequently retraced approximately 3.8% in March following the military actions in late February.
Despite the market falls, funds maintained a positive position for the financial year, with an estimated gain of about 2.5%. Data from SuperRatings indicated a 2.85% decrease for "balanced" portfolios since the conflict began.
Expert Commentary on Superannuation
Mano Mohankumar, head of superannuation investment research at Chant West, stated that periods of market weakness are an inevitable part of the investment journey and that many members, including older ones, can afford to remain patient. He advised against making immediate decisions during share market volatility, such as moving to lower-risk options, noting this approach can crystallize losses and risk missing market rebounds.
Australian Retirement Trust (ART) general manager Jody Fitzgerald stated that volatility is a normal aspect of investing and that superannuation is a long-term asset. ART reported a one-third increase in member calls concerning balances since the conflict's onset, though calls for investment option changes remained stable. HESTA chief executive Debby Blakey stated the fund anticipates diverse market conditions and emphasized the advantages of a diversified portfolio.
"Volatility is a normal aspect of investing... superannuation is a long-term asset." – Jody Fitzgerald, Australian Retirement Trust
Corporate News and Fund Manager Adjustments
Fund Manager Portfolio Changes
Blackwattle Investment Partners adjusted their investment portfolio in response to the evolving impact of AI on the technology sector. Their strategy focused on avoiding downside earnings risk and seeking quality companies with earnings upside risk. Specific adjustments included:
- Xero: Was the largest negative contributor to Blackwattle's mid-cap fund performance in January.
- Life360: Blackwattle's large-cap quality fund managers viewed the share sell-down as indiscriminate and expressed a belief in the company's strong franchise.
- Catapult Sports: Blackwattle's small-cap fund initiated a position after its share price dropped 45%, holding a positive long-term view.
Corporate Announcements
- Telstra: Reported an 8.1% rise in half-year profit to $1.2 billion, attributed to cost-cutting that resulted in over 2300 job reductions.
- Wesfarmers: Reported a 3.1% increase in sales to $24.2 billion and a 9.1% rise in profit to $1.6 billion.
- Medibank: Shares fell 5.7% after an 11% decrease in half-year net profit.
- Nine Entertainment: Increased by 4.1% after agreeing to sell talkback radio stations for $56 million and purchasing outdoor media firm QMS for $850 million.
- UnitedHealth Group: Stock rose 7% after reporting quarterly profit above expectations.
- Quest Diagnostics: Stock rose 4.4% after reporting quarterly profit above expectations.
- Apple: Stock fell 2.5% after Tim Cook announced he will step down as CEO; later reported a quarterly record for iPhone sales.
- Amazon: Stock rose 0.7% after Anthropic announced a new agreement with AWS; later dropped 5.6% despite announcing investment plans.
- Tractor Supply: Stock fell 11.7% after reporting profit and revenue below expectations.
- Microsoft: Market capitalization decreased by $US357 billion, with stock plunging 10% despite stronger-than-expected profit.
- Meta Platforms: Rallied 10.4% after exceeding profit expectations; later fell 8% after a jury ruling in a social-media addiction trial.
- SpaceX: Reportedly considering an initial public offering with a target valuation of approximately $US75 billion.
- On Holding: Stock slumped 11.2% after its CEO announced resignation.
- Terns Pharmaceuticals: Shares rose 5.7% after Merck announced an acquisition deal.