Markets on edge after Trump strikes Iran

Australian futures are pointing to a soft start to the trading week in the antipodes after US President Donald Trump ordered a strike on Iran over the weekend that killed dozens of high-ranking officials including the supreme leader Ayatollah Ali Khamenei, putting markets on edge as analysts and investors wake up to the carnage.

Brent crude oil futures are expected to jump even higher as shipping through the Strait of Hormuz slows, despite the Organization of Petroleum Exporting Countries agreeing to boost output in a bid to calm energy markets.

Energy stocks and miners are expected to rally on a rising oil price and increased demand for safe havens such as gold, while transport and logistics firms such as Air New Zealand and Mainfreight will face another squeeze on rising fuel costs.

Meanwhile, New Zealand finance minister Nicola Willis and commerce minister Scott Simpson announced tweaks to the state-sponsored KiwiSaver scheme to let first-time farm buyers use their scheme’s balance to help make the purchase.

A new world order

Brent crude oil futures rose 0.5% to US$73.21 a barrel at 7am in Auckland while gold futures were up 0.9% at US$5,297 an ounce as investors started to digest the impact of US President Trump’s sweeping strikes against Iran over the weekend and the ensuing retaliatory drone and missile attacks across the Middle East.

Iran’s supreme leader Ayatollah Ali Khamenei is among the dozens of high-ranking officials killed in the strike, while the US and Israel continue their strikes on the nation.

“The scale of the attacks, and Iran’s response, has exceeded expectations, pointing to further demand for safe‑haven assets and upward pressure on oil prices,” Bank of New Zealand senior interest rate strategist Stuart Ritson said in a note. “With President Trump calling for regime change and signalling the risk of a protracted conflict, the range of potential outcomes has widened, and will likely weigh on risk‑sensitive assets.”

The kiwi dollar traded at 59.97 US cents at 7am in Auckland from 59.89 cents last week, having shed 0.4% in the month of February.

Oil prices are expected to jump as much as 15% when markets reopen as traffic through the Strait of Hormuz shipping lane slows down and Opec+ agreed to boost production to mitigate the short-term hit to energy prices.

Australian futures show the S&P/ASX 200 index is expected to fall 0.2% when trading opens, with energy companies such as Woodside Energy and gold miners among those likely to rally on rising commodity prices, while the likes of transport and logistics firms such as Air New Zealand, Qantas Airways, Mainfreight and Move Logistics face a steeper fuel bill.

Roiled markets

Middle Eastern markets were broadly weaker, with Saudi Arabia’s Tadawul All Share index falling 2.2% to a month-low on Sunday, even as Saudi Aramco jumped 3.4%. United Arab Emirates markets in Dubai and Abu Dhabi were closed for two days while the attacks continue.

The weekend strike came with equity markets already nervous after financial stocks including Goldman Sachs and Citigroup were knocked by the collapse of UK mortgage firm Market Financial Solutions.

The Dow Jones Industrial Average was down 1.1% on Friday, while the tech-heavy Nasdaq Composite fell 0.9%, while across the Atlantic, the UK’s FTSE 100 index gained 0.6%, Germany’s DAX was marginally weaker and France’s CAC 40 fell 0.5%.

New Zealand’s domestic earnings season wrapped up with a flurry last week in what was generally an upbeat reporting period, with the S&P/NZX 50 index gaining 2.2% in February, its best monthly gain since September.

Local data due today include Statistics New Zealand’s monthly employment indicator.

And the government announced new tweaks to the state-sponsored KiwiSaver scheme over the weekend, with finance minister Willis and commerce minister Simpson saying first-time farm buyers will be able to tap their scheme to make a purchase through a majority-owned commercial entity, provided the farm is their principal place of residence. Workers in service tenancies, such as farm workers or rural teachers, will also be able to access the first-home withdrawal, having previously been blocked given their jobs require them to live in housing provided by their employers.

Reporting by Paul McBeth. Image from Sunira Moses on Unsplash.