Markets ‘hanging on’ to a possible Iran war resolution
The Australian share market has closed lower for the week but is virtually unchanged in the year to date. Despite a recent spike in the oil price as tensions flared in the Strait of Hormuz, the market is “hanging onto the idea that we will get a resolution in the next few weeks”, Morningstar equity market strategist Lochlan Halloway said. By the close of trade, the ASX 200 fell 6 points or less than 0.1 per cent on Friday to take the weekly decline to 1.8 per cent. The index ending at 8,786. Financial markets are still taking a wait-and-see approach to developments in the Iran war. While financial markets don’t view the Middle East conflict as “good news”, Lochlan Halloway said “there is also a big AI story going on in the background, which certainly, in the US, is keeping equity prices buoyant, even though there’s real material economic risks.” This week has seen selling in the bond market and buying in the stock market. Lochlan Halloway describes this as “particularly pronounced disconnect”, which will need to be resolved either with a further escalation of the Middle East war or a resolution. Markets are also wrestling with the continued extraordinary development in artificial intelligence (AI) infrastructure and the job losses that are coming with it. “We’re at the start of this huge CapEx investment journey in AI and the returns should come later on…There are some encouraging signs, but we’ve got a long way to go … before we see the proof that this has all paid off.”
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