ASX200 declines as war in the Middle East escalates

The local sharemarket dipped lower on Wednesday as investors braced for rising instability in the Middle East.

The benchmark ASX200 slipped 10.7 points, or 0.13 per cent, to close at 8198.2, while the broader All Ordinaries index fell 12 points, or 0.14 per cent, to settle at 8469.9.

The All Technology index tumbled 1.17 per cent to 3454.6.

The sell-off was broad based, with eight of 11 industry sectors ending in the red, led by discretionary stocks with a 1.73 per cent decline.

Conglomerate Wesfarmers lost 2.28 per cent to $68.98 a share, Endeavour Group fell 1 per cent to $5 and JB Hi-Fi retreated 0.45 per cent to $81.04.

The energy sector booked a rollicking 2.35 per cent gain with oil prices spiking on the prospect of a broader regional war in the Middle East.

Woodside Energy rallied 3.1 per cent to $25.91, Santos lifted 2.43 per cent to $7.17 and Beach Energy jumped 4.62 per cent to $1.24.

Brent Crude surged 2.6 per cent to US$73.56 a barrel on Tuesday and IG market analyst Tony Sycamore said a wider conflict could drive prices higher.

“Speculation of an Israeli strike on Iranian oilfields seems unlikely as such a move would likely drive oil prices toward $80, displeasing Israel’s allies, who are making strides against inflation,” he said.

“Instead, strategic Israeli strikes on critical weapons factories and military objectives are more probable, similar to the events in April.

“If the conflict surrounding Israel escalates into direct confrontation with Iran, aside from the severe humanitarian impact, there’s a risk that Iranian oil, currently 4 per cent of global supply, could be cut off due to embargoes or military actions.

“Any potential loss of Iranian supply might be offset by the return of Libyan oil and increased Saudi production, as voluntary supply cuts are set to expire on December 1.”

Santos also rallied on the news it will supply 20 LNG cargoes, or up to 500,000 tonnes per annum, over three years to TotalEnergies Gas and Power Asia Private Limited.

“There continues to be extremely strong demand in Asia for high heating value LNG from projects such as Barossa and PNG LNG as countries focus on reducing their carbon emissions,” Santos CEO Kevin Gallagher said.

The big miners lifted as Singapore iron ore futures rose 1.54 per cent in afternoon trade to hit $109.70 a tonne.

BHP added 0.94 per cent to $45.06, Rio Tinto edged up 0.17 per cent to $125.96 and Fortescue gained 0.9 per cent to $20.14.

But the big banks were mixed.

Commonwealth Bank rose 0.64 per cent to $134,19, but ANZ slipped 0.13 per cent to $30.11, NAB lost 0.4 per cent to $36.98 and Westpac edged down 0.26 per cent to $31.11.

Wednesday’s fall followed a rough session on Wall Street overnight Tuesday, with the Dow Jones losing 173 points, or 0.41 per cent, to 42,156, the S and P 500 index tumbling 0.93 per cent to 5708 and the tech-heavy Nasdaq slumping 1.53 per cent to 17,910.

Aussie tech companies followed their US counterparts into the red, with Xero slumping 2.51 per cent to $146.43 and Megaport falling 3.32 per cent to $7.29.

In corporate news, uranium miner Paladin Energy climbed 0.51 per cent to $11.83 after announcing Canadian authorities would scrutinise its proposed acquisition of Toronto-listed Fission Uranium Corporation on national security grounds.

The top gainer on the ASX200 was Sigma Healthcare, leaping 7.93 per cent to $1.90.

The largest laggard was Vault Minerals, which tumbled 4.47 per cent to 32c.

The Aussie dollar retreated 0.07 per cent to buy US68.7c at the closing bell.