Renewed US-Iran tensions put oil prices back in focus

New Zealand and Australian markets are starting the week with oil prices back in the spotlight after a fresh wave of strikes between the US and Iran tests the tentative ceasefire.

Australian futures are pointing to a modest gain for the ASX when trading opens across the Tasman as investors square up their positions heading into the end of the June financial year, with New Zealand’s S&P/NZX 50 index poised for its best quarter since September.

The Bank for International Settlements pointed to the circular financing deals for artificial intelligence infrastructure as a pressure point threatening financial security following a mixed session for US tech stocks on Friday.

Meanwhile, local data today include Statistics New Zealand’s monthly jobs figures, with the ANZ business confidence survey on Tuesday in view as economists weigh up whether the Reserve Bank will hike the official cash rate at its July meeting.

Renewed tensions

Tensions between the US and Iran escalated over the weekend with missile and drone strikes raising fears that the tentative ceasefire might unravel ahead of a fresh round of negotiations.

Brent crude oil futures were down 2.6% at US$73.57 a barrel at the end of last week and investors will keep a close eye on where the market opens on Monday, with oil-sensitive companies such as Air New Zealand and Channel Infrastructure also in view.

“Weekend reports that Iran launched missile and drone attacks targeting Bahrain and Kuwait following recent US military strikes have raised fresh concerns about the stability of the Strait of Hormuz, a critical shipping route for global oil supplies,” Moomoo market strategy consultant Greg Boland said in a note. “While falling oil prices helped ease inflation concerns last week, any escalation that disrupts energy exports could quickly reverse that trend and weigh on global markets.”

US and European stock markets were weaker on Friday as semiconductor firms and chipmakers such as Micron Technology and Nvidia declined with continued unease over whether the massive AI infrastructure investment will eventually deliver appropriate returns.

AI unease

The BIS joined the chorus of voices urging caution as it warned the AI exuberance risked an investment bust that could unnerve global markets in its annual report, while The Financial Times reported that Google capped Meta’s use of its Gemini AI models when the social media giant sought more computing capacity.

The Nasdaq Composite dipped 0.2% on Friday while the Dow Jones Industrial Average and S&P 500 were both down 0.1%, while the UK’s FTSE 100 slipped 0.2%, Germany’s DAX dropped 1.3% and France’s CAC 40 declined 0.6%.

Australian futures are pointing to a 0.2% gain for the ASX 200 when trading opens across the Tasman, with investors preparing for the end of the June financial year on Tuesday. The ASX 200 is on track for a 3.3% gain in the June quarter, while the NZX 50 is up 4.5% so far.

The kiwi dollar traded at 56.39 US cents at 7am in Auckland from 56.41 cents last week, with Stats NZ’s monthly filled jobs report due today.

Economists are divided on whether the Reserve Bank will raise the 2.25% official cash rate on July 8, with bond traders pricing in a 64% chance of an increase at the meeting.

Reporting by Paul McBeth. Image from zhao chen on Unsplash.