SYDNEY, Sept. 2 — Australia’s benchmark S&P/ASX 200 index closed at 8,978.4 points on Wednesday, down 88.3 points, or 0.97%, in one of the market’s steepest one-day drops in months. The selloff followed fresh U.S. military strikes on Iran that pushed Brent crude to a two-month high and deepened a global bond market rout. The All Ordinaries index fell sharply as well, with only a small fraction of the 200 companies in the benchmark finishing in positive territory.
Mining and gold stocks bore the brunt of the selling, while energy producers were among the rare bright spots. The catalyst came overnight as the United States launched new strikes against Iran, escalating a conflict now in its seventh month.
Moomoo Australia chief market strategist Tapas Strickland said the shift in investor sentiment was swift and broad-based. “The catalyst for the sudden shift in sentiment stems from escalating Middle East tensions following strikes near the Strait of Hormuz, raising immediate concerns over potential bottlenecks in critical global shipping channels,” Strickland said. “Higher energy costs risk re-igniting headline inflation just as central banks seek confirmation that price pressures are contained.” The equity losses were compounded by a deepening rout in global government bond markets.
Australia’s 10-year bond yield jumped to 5.19%, its highest level in 15 years, as investors demanded greater compensation for rising inflation and fiscal risk. Japan’s 10-year yield touched 3% for the first time since 1996, while borrowing costs in Germany and the United Kingdom climbed to multi-year highs.
Gold miners were among the hardest hit locally after spot gold slid to a one-month low near $4,314 an ounce, pressured by growing expectations of a U.S. Federal Reserve interest rate move this month. Shares in several mid-tier gold producers fell between 6% and 7.5%, while a major copper miner dropped roughly 8%. The country’s largest iron ore miners also slumped, with declines of between 2% and 3.4% weighing heavily on the broader index given their size.
Energy stocks stood out as the exception, buoyed by the jump in oil prices. A handful of individual gainers — including a grains and agribusiness company, an insurer and the nation’s largest telecom operator — posted solid gains. The selloff came the same day the Australian Bureau of Statistics reported the economy grew 0.4% in the June quarter and 2.1% over the year, slightly ahead of market expectations.
ABS head of national accounts Grace Kim said the underlying picture remained mixed. “Economic growth remained subdued in the June quarter as households continued to behave cautiously,” Kim said.
“While increased spending and business investment occurred in pockets of the economy, imports supported much of the growth, moderating its contribution to overall GDP growth.” The stronger-than-forecast reading immediately fueled debate among economists over whether the Reserve Bank of Australia would resume raising interest rates at its September policy meeting. Capital Economics analyst Marcel Thielant said the data strengthened the case for further rate hikes.
Investors now face a two-front risk: whether Middle East supply disruptions push energy costs high enough to force central banks off their easing paths, and whether Australia’s modest growth print gives the RBA room to hold or reason to hike.
