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Volatility has continued in the oil market. Oil futures reached a $US80.50 per barrel on Thursday (US time) but later fell back.
Analysts say this suggests that market optimism is slanted towards the tit-for-tat US-Iran fighting being only minor in nature, rather than a complete breakdown of the diplomatic process. CommSec equity market strategist James Gruber says a safe passage through the Strait of Hormuz for ships remains critical for the oil market and time is running out for it to be officially opened to all traffic before the oil price spikes higher. “So it’s logical that oil goes up because obviously there are fears that Iran will close or partially close the Strait of Hormuz.” He added, “if the Strait of Hormuz closes (completely), how long can developed nations, including Australia, last without that oil is the big question. And some analysts suggest, you know, it could be four to six weeks before we start having to do things like rationing.” It was oil-related stocks that helped support the local share market on the last trading day of the week. The S&P/ASX 200 closed 0.5 per cent higher at 8,806. The ASX 200 is now 4 per cent lower than its 2026 record closing high.
Westpac has also firmed up its call for the Reserve Bank to hike interest rates in August. James Gruber says the Reserve Bank continues to look for signs that inflation may be easing. “The big driver potentially of oil and inflation is the war ending, getting oil flowing and getting that inflation down. But there are a number of other factors that the RBA will need to weigh up. As for whether interest rates will stay where they are or rise. That will depend on whether this inflation stays sticky and goes higher or recedes,” he said.
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