ASX 200 Back Below 8600: Oil Prices Jump as Trump Comments See Midday Momentum Shift

Aussie markets gave back half of Wednesday’s rally as US President Donald Trump’s hawkish stance on Iran pushed oil prices back above US$105 and triggered a broad risk-off session across equity markets, with the ASX 200 not immune to the pressures.

The S&P/ASX 200 closed down 92.3 points, or 1.06%, to settle back below the 8,600 level at 8,579.50, erasing roughly half the gains posted in the previous session. The pullback was broad-based, with red ink across all eleven GICS sectors despite a sharp surge in global crude prices. Brent crude jumped approximately 6% to US$107 per barrel, while West Texas Intermediate added around 5% to reach US$105, marking the highest sustained levels since the initial escalation of Middle East hostilities in mid-March.

ASX 200 Today – Leaders and Laggards

Energy stocks, paradoxically, fell 0.59% despite the tailwind from surging oil, suggesting markets are now pricing in demand destruction and stagflation risks rather than treating higher crude as a straightforward profit boon for producers. Materials shed 2.73% as cyclical concerns overshadowed commodity inflation, while Information Technology tumbled 3.99%, reflecting the sector’s acute sensitivity to rising real yields and tightening financial conditions. Financials declined a more modest 0.4%, and Industrials dropped 0.79%.

Only a handful of stocks in the benchmark index posted gains exceeding 2%. Ryman shares added 4.49%, Alcoa Corporation rose 4.03% to $101.74, as the aluminium producer benefited from its inflation-hedge characteristics and exposure to metals supply disruption. Contact Energy climbed 2.8, Ebos Group added 3.39%, and Coles Group gained 2.59%, with the trio representing a clear rotation into defensive, regulated, and staples names.

At the other end of the spectrum, Generation Development Group plunged 11.16% to $3.90, Catalyst Metals fell 8.93% to $6.12, and Zip Co dropped 8.16%. Wealth management platforms were hammered, with HUB24 down 7.23%, Netwealth off 6.35%, and Pinnacle Investment Management shedding 6.7% as markets repriced the outlook for funds under management and fee-based revenue in a volatile equity environment.

Why The Midday Shift in Sentiment

After starting the session with a push above 8,700, the session flipped on it’s head as comments from President Trump’s latest national address, in which he stated the United States would continue to hit Iran “very hard” and pledged to “finish the job,” set markets back. The speech provided no credible roadmap for de-escalation or for reopening the Strait of Hormuz, the critical shipping chokepoint through which roughly one-fifth of global oil supply passes. The absence of diplomatic progress dashed hopes that had begun to build earlier in the week when some market participants speculated the administration might pivot toward a negotiated settlement.

The oil price spike represents the latest leg in what has been the steepest monthly move in crude since the 1990 Gulf War, with Brent rising nearly 60% from mid-March lows. That surge is now feeding directly into inflation expectations across developed economies. Reserve Bank of Australia commentary suggest that if oil remains near or above US$100 per barrel, Australian headline inflation could re-accelerate toward 5% in the second quarter, up from the 3.4% print recorded in the December quarter.

The inflation shock is forcing a reassessment of central bank policy paths. Several strategists now expect the RBA may need to deliver up to three additional rate hikes by year-end if energy prices stay elevated, a scenario that would push the cash rate to 5.35% or higher and significantly tighten financial conditions for Australian households and corporates. That repricing is particularly damaging for rate-sensitive sectors such as technology, small-cap growth, and wealth management, all of which underperformed sharply on Thursday.

The ASX 200’s decline extends a difficult month for Australian equities. The benchmark index fell approximately 7.8% in March, its first monthly drop in four months and the worst performance since January 2022. The combination of geopolitical risk, oil-driven inflation, and expectations for higher terminal rates has unwound much of the optimism that drove the index to record highs earlier in the year.

Outlook

From a fundamental perspective, the key variables to watch are oil prices and the trajectory of the Iran conflict. If crude remains above US$100 for an extended period, the inflation and rates channel will continue to weigh on equity valuations, particularly for long-duration growth names. Conversely, any credible signal of de-escalation or a deal to reopen Hormuz shipping lanes could trigger a sharp reversal in both oil and risk assets, potentially recouping much of March’s losses in a matter of days.

Sector positioning is becoming increasingly defensive. The outperformance of Coles, Contact Energy, and Ebos Group signals that capital is rotating toward companies with pricing power, regulated revenue streams, or exposure to non-discretionary demand. That rotation typically occurs late in an economic cycle or when markets anticipate a stagflationary environment characterised by weak growth and persistent inflation.

Some long-term oriented analysts have begun to argue that the recent correction in Australian and US equities is creating attractive entry points for patient investors. The thesis hinges on the idea that the current oil shock and war premium are temporary phenomena that will eventually resolve, leaving equities trading at discounted valuations relative to their medium-term earnings power. However, that view remains a minority position in the current risk-off environment, and most institutional flows continue to favour cash and defensive positioning over opportunistic equity buying.

The wealth management sector’s sharp underperformance is particularly notable. HUB24, Netwealth, and Pinnacle Investment Management are all asset-light, fee-based businesses whose revenues are directly tied to funds under management and equity market levels. In a session where the ASX fell more than 1% and volatility spiked, markets marked down expectations for net flows, FUM growth, and fee margins across the sector. The moves also reflect concern that a sustained period of equity market weakness could trigger client redemptions and force these platforms to compete more aggressively on pricing.

Thursday’s session reflects the current state of global markets, caught in the crossfire of geopolitical instability, oil-driven inflation, and the possibility of additional tightening of monetary policy. While defensive pockets of the market continue to attract capital, the breadth of the sell-off and the absence of any near-term catalyst for de-escalation suggest further downside risk remains in play until either oil prices stabilise or diplomatic progress materialises, leaving the ASX 200 vulnerable to additional tests of support in the sessions ahead.