The Australian sharemarket suffered its sharpest decline in five weeks on Friday as surging oil prices and renewed geopolitical tensions dampened investor sentiment. The S&P/ASX 200 index fell 66.7 points, or 0.75 per cent, to close at 8,772.3. The broader All Ordinaries index also retreated, slipping 76.6 points, or 0.85 per cent, to 8,941.5. This sell-off wiped out gains from earlier in the week, leaving the market slightly lower for the week overall.
Global markets have been under pressure as Brent crude oil prices climbed above $US100 a barrel for the first time since May. The price spike follows an escalation in the conflict between the United States and Iran, specifically involving reports of Houthi-led attacks on tankers in the Red Sea. This energy price surge has reignited fears of global inflation, prompting investors to pull back from riskier assets like technology and mining stocks.
Locally, the market is also grappling with the prospect of further interest rate hikes. Recent data showing a surprise jump in Australian employment has led many analysts to believe the Reserve Bank of Australia may raise rates as soon as its August 11 meeting. Investors are now looking ahead to next week’s release of second-quarter inflation figures, which will be a critical factor in the central bank's next policy decision.
While energy stocks saw some support due to higher oil prices, the broader market struggled. Mining, industrial, and consumer-focused companies led the declines. The Australian dollar also weakened, trading at 69.74 US cents, down from 70.05 US cents the previous day. As the conflict in the Middle East continues to evolve, market participants remain cautious about the potential for further volatility in both energy costs and corporate earnings.