Antipodean markets brace for impact as oil climbs above US$90/bbl
Iran is close to naming a new supreme leader.
Australian futures are pointing to a slump for the ASX when trading opens across the Tasman after Brent crude oil prices surged on Friday and US jobs figures were softer than expected, knocking stocks on Wall Street.
Oil markets are set to face more pressure as the United Arab Emirates and Kuwait join Iraq in cutting production as storage runs out with the disruption to shipping channel, the Strait of Hormuz, compounding the issues facing fuel-hungry businesses such as Air New Zealand.
Meanwhile, Iran said it’s close to naming a successor to Ayatollah Ali Khamenei, who was killed in the opening strikes by the US and Israel, while President Donald Trump is weighing up sending special forces on the ground to seize the Islamic Republic’s near-bomb-grade uranium.
And politics is coming to the fore domestically with prime minister Christopher Luxon’s post-cabinet press conference in focus after a weak poll for the National party last week stoked speculation his leadership may face a challenge.
Spiking volatility
Australian futures indicate a 1.8% slide for the S&P/ASX 200 index when trading opens across the Tasman, following weak leads from Wall Street and Europe on Friday when Brent crude oil prices surged above US$90 a barrel and non-farm payrolls data showed the US economy shed 92,000 jobs last month, well short of the 57,000 new jobs expected.
The volatility index, known as Wall Street’s fear gauge, jumped 24% on Friday to 29.49, its highest level since April last year, as investors were unnerved by the jobs data and the latest surge in oil prices. Brent crude oil futures were up 0.7% at US$93.32 a barrel at 7am in Auckland.
“US equities fell following a weaker‑than‑expected US labour market report, while ongoing Middle East tensions drove another leg higher in oil prices,” Bank of New Zealand senior interest rate strategist Stuart Ritson said in a note. “For the Federal Reserve, the softening in the labour market makes for a complex macro environment, with policymakers already grappling with renewed upside risks to energy and commodity prices.”
Bond traders are fully pricing in a rate hike by New Zealand’s Reserve Bank in October, before the November election, as rising fuel costs threaten to revive inflation. The kiwi dollar traded at 59 US cents at 7am in Auckland from 59.11 cents last week.
That comes as prime minister Christopher Luxon comes under growing pressure after the Taxpayers’ Union-Curia poll last week put support for the senior ruling National party at 28.4%, stoking speculation the leader may face a challenge from his caucus. Luxon is doing his usual Monday media rounds, with the post-cabinet press conference this afternoon, where will likely face questioning about his position.
Energy ructions
Oil markets face more volatility after the UAE and Kuwait started cutting production, joining Iraq, which had already reduced output by 60%, as the snarl-up in the Strait of Hormuz strains storage capacity.
Saudi Arabia’s Aramco climbed 4.1% on Sunday as the energy giant rallied on the rising oil price.
National carrier Air New Zealand slumped on Friday to its 2020 lows during the covid lockdowns after Forsyth Barr analysts raised a warning about accelerating jet fuel prices potentially adding between $4 million and $5 million a day to the airline’s fuel bill.
Logistics firms such as Mainfreight and Move Logistics and courier operator Freightways also face an immediate hit from rising petrol prices, while tourism and travel firms such as Tourism Holdings and Auckland International Airport also under pressure.
Meanwhile, Iran said it is close to naming a new supreme leader, despite US President Trump’s demands to be involved in the succession.
Trump warned Iran faces more intense attacks, and is reportedly considering sending in special forces to seize uranium supplies.
