NZ, Australian markets brace as Houthi strikes broaden Middle East war

New Zealand and Australian markets are bracing for impact as Houthi rebels opened up a new front in the Middle East conflict and Iran said it’s prepared for a ground invasion, even after US President Donald Trump extended the deadline to reach a ceasefire with the Islamic Republic.

Stocks in the US and Europe tumbled on Friday as hopes for a swift end to the conflict were dashed, with big oil companies one of the few havens on Wall Street as Chevron and Exxon Mobil rallied, following Brent crude prices higher.

New Zealand’s next update on fuel supplies is due today, with the Politik newsletter reporting the government is prepared to tap 40 days’ worth of emergency stocks held overseas if fuel companies can’t deliver on their forecast supply, and is weighing options on boosting the nation’s buffer.

Meanwhile, KMD Brands is set to resume trading after a protracted capital raising, which attracted tepid demand at a significant discount, according to reports across the Tasman.

Global tremors

Brent crude oil futures were up 0.9% at US$106.29 and the Polymarket prediction market is pricing in a 33% chance of a ceasefire by the end of April as the conflict in the Middle East escalated over the weekend.

Houthi rebels in Yemen, backed by Iran, launched two attacks on southern Israel over the weekend, adding more pressure to oil shipping lanes. The Red Sea has been an alternative route for some shipments out of the Persian Gulf, with the Strait of Hormuz all but closed.

Meanwhile, Iran said it’s prepared for a ground invasion with US marines arriving in the Middle East and giving the White House more options if peace deal can’t be brokered.

The kiwi dollar dropped to 57.45 US cents at 7am in Auckland from 57.72 cents last week, as investors lost their appetite for riskier assets. The volatility index, known as Wall Street’s fear gauge, spiked 13% to 31.05 on Friday, with the S&P 500 sliding 1.7% and the tech-heavy Nasdaq Composite sinking 2.2%.

“Global equities extended their selloff, putting the S&P 500 on track for its worst month since 2022 and a fifth straight weekly decline, as Middle East tensions kept risk appetite fragile,” Bank of New Zealand senior interest rate strategist Stuart Ritson said in a note. “The increased risk of disruption for Red Sea shipping after the Houthi attacks over the weekend could add a further geopolitical risk premium to oil.”

In Europe, the UK’s FTSE 100 index dipped 0.1%, while Germany’s DAX sank 1.4% and France’s CAC 40 declined 0.9%.

Oil haven

The Dow Jones Industrial Average declined 1.7%, with Amazon and Salesforce leading the blue-chip index lower. Tech stocks have been among the hardest hit through the conflict as the prospect of higher interest rates weighs on their valuations – on the NZX, Serko, Vista Group International and Gentrack have tumbled between 14% and 24% so far this month.

Oil and gas firms were one of the few havens on Wall Street on Friday, with Chevron and Exxon among the day’s gainers.

On the NZX, import terminal operator Channel Infrastructure has been one of the few gainers through the month, up 0.7% so far in March.

Meanwhile, a profit warning from cruise line operator Carnival Corp will set a soft tone for domestic tourism stocks such as Tourism Holdings.

That downbeat tone is set to continue into the antipodes, with Australian futures pointing to a 0.8% slide for the S&P/ASX 200 index when trading opens across the Tasman.

Local data today include Statistics New Zealand’s monthly filled jobs report, while the Ministry of Business, Innovation and Employment will update fuel stocks.

The Politik newsletter today reported the government is prepared to tap fuel stocks overseas, with associate energy minister Shane Jones confirming it’s looking to access the 40 days of reserves held in the UK, US and Japan through its International Energy Agency agreement.

Meanwhile, retailer KMD is expected to resume trading today after a protracted capital raising, which delayed the release of its first-half result. The Australian’s Dataroom and The Australian Financial Review’s Street Talk columns reported the retailer’s offering attracted soft demand from investors, with other options being considered to fill the funding gap.

Reporting by Paul McBeth. Image from Chris LeBoutillier on Unsplash.