ASX falls on ‘very nervous start’ to Monday’s trading after US strikes Iran

Investors face a “nervous” week, with the ASX copping a $25bn loss on Monday morning as the fallout from the Middle East conflict sparks market chaos.

Australia’s sharemarket slumped by $25bn at lunchtime as the market sell-off from the latest Trump strikes spooked investors.

Oil prices have surged as the rest of the market wobbled on Monday morning, with the ASX 200 suffering a “very nervous start” to the trading week.

The ASX 200 fell 44.30 points or 0.52 per cent to 8461.20 on the opening bells as investors weighed up the risks in the Middle East.

It subsequently dropped during the days trading, down 0.98 per cent at lunchtime, before moving up 0.3 per cent.

IG market analyst Tony Sycamore said $25bn was wiped off the market during the major slump as investors fear the fallout from the Middle East.

Australia’s sharemarket slumped by $25bn at lunchtime as the market sell-off from the latest Trump strikes spooked investors. Picture: ASX

“These concerns proved well-founded after the US conducted strikes with B-2 Stealth Bombers on three Iranian nuclear sites over the weekend and has since claimed the attacks “obliterated” Iran’s nuclear capabilities,” he said.

“Looking ahead, beyond assessing the fallout from the weekend’s events in Iran, US equity markets may begin to feel the impact of month-end and quarter-end rebalancing flows, which are suspected to involve selling of US stocks and the buying of bonds.”

The Aussie dollar also slumped, falling from US64.94 cents to US64.48 as the tension escalates.

Investors are worried about two major potential escalations in the conflict, with either the closure of the Strait of Hormuz or an all-out regional war negatively impacting the price of oil.

Cutting off the Strait of Hormuz could send the price of oil above $US100 a barrel, as the 32km mile stretch is the primary route of exports from Saudi Arabia, Iraq, the UAE, and Kuwait.

Nervous investors are selling down the ASX over fears of the Iran-Israel conflict. Picture: NewsWire/ Gaye Gerard

Capital.com senior financial market analyst Kyle Rodda said traders would be looking to gauge risks of energy shocks and the potential impact of the broader conflict.

“The markets are confronting a very nervous start to the week where the only thing that will matter is the fallout from the US missile strike on Iranian nuclear assets over the weekend,” Mr Rodda said.

“There’s already some talk of (closing the Strait of Hormuz) from the Iranians, with the instability in the region and risks to critical infrastructure alone enough to worry energy markets.”

US Secretary of State Marco Rubio said closing the crucial Strait of Hormuz would be a “suicidal” move to the Iranian regime.

Mr Rubio said closing the strait would affect the US, but it would have “a lot more impact on the rest of the world”, particularly on China.

“That would be a suicidal move on (Iran’s) part because I think the whole world would come against them if they did that,” Mr Rubio said.

On Saturday (Sunday AEST), US forces confirmed strikes on three Iranian nuclear facilities in the latest flair up between Israel and Iran.

US President Donald Trump said the three nuclear sites in Iran – Fordow, Isfahan and Natanz – were “completely obliterated”, but this was yet to be independently verified.

The ASX has fallen on Iran-Israel tensions. Picture NewsWire/ Gaye Gerard

The armed conflict sent the price of Brent crude oil surging to above $US80 a barrel after it was about $US65 a barrel.

Mr Rodda said the first move by markets would be a possible kneejerk, with traders taking a shoot-first-ask-questions-later approach.

“But as the dust settles and more of the facts become known – especially the extent of the damage achieved by the US – the markets will turn to gaming out the likely course of events from here and quantifying the risks to asset prices,” he said.

Originally published as ASX falls on ‘very nervous start’ to Monday’s trading after US strikes Iran