Australian shares plunged on Monday, wiping about $90 billion from the value of the national stock market as surging oil prices and escalating tensions in the Middle East rattled global investors.
The benchmark S&P/ASX 200 index fell 2.85%, closing below 8,600 points in its sharpest single-day decline since the tariff shock triggered by **Donald Trump’s “Liberation Day” trade measures last year.
The sell-off followed a spike in global crude prices, which surged above US$100 a barrel before trading opened in Australia after violence in the Middle East intensified over the weekend.
Higher oil prices are widely viewed as a major driver of inflation because energy costs flow through the entire economy, affecting transport, manufacturing, groceries and household utilities.
Market losses across most sectors
The downturn spread across nearly every part of the Australian share market.
Ten of the ASX’s 11 sectors ended the session in negative territory, with the materials sector falling more than 5%as mining stocks were hit particularly hard.
The energy sector was the only area to post gains, benefiting from rising crude prices.
Markets initially dropped more than 4% during early trading, before recovering slightly later in the afternoon.
Oil shock fuels investor anxiety
Analysts say the market reaction reflects growing fears that the conflict could disrupt global energy supplies and reignite inflation pressures.
Crude oil prices have climbed to their highest levels in about four years, raising concerns that central banks may be forced to keep interest rates higher for longer.
Tony Sycamore, a market analyst at IG Australia, said the reaction in Australian equities mirrored broader global trends.
“Local markets are mirroring the intense global risk-off mood,” Sycamore said in a briefing to clients.
Shipping and supply chain risks
Logistics experts also warn the impact of the conflict could extend well beyond financial markets.
Archival Garcia, chief executive of freight technology company Fluent Cargo, said rising fuel costs and maritime risks could push up global shipping prices.
“Fuel costs rise, war-risk insurance premiums increase, vessels slow or reroute, and freight rates climb – particularly across energy-dependent supply chains,” Garcia said.
Higher shipping costs could eventually feed into prices paid by Australian consumers, particularly for imported goods.
Interest rate pressures
The spike in oil prices also complicates the outlook for monetary policy in Australia.
The Reserve Bank of Australia is due to meet later this month, with economists warning that persistent inflation pressures could push the central bank toward another rate rise.
If interest rates increase at the same time as petrol and other living costs rise, household spending could weaken, adding another layer of pressure on economic growth.
Financial analysts note that rising interest rates, growing unemployment and external shocks such as wars have historically been key triggers for sharp declines in equity markets.
