ASX to slide as looming Iran deadline unsettles investors

Investors are nervously waiting for the latest deadline set by President Donald Trump to destroy Iran’s power plants and bridges, with futures pointing to a slight fall in the Australian sharemarket when it opens on Wednesday.

The ASX futures were down slightly by 3 points, or 0.03 per cent, at 5.45am AEDT. The sharemarket closed in the green on Tuesday as oil prices moved higher. The Australian dollar has strengthened, fetching US69.67¢ at 5.45am.

US stocks swung sharply on Tuesday as uncertainty about the war with Iran increased ahead of the looming deadline.

The S&P 500 fell as much as 1.2 per cent after Trump threatened that a “whole civilisation will die tonight, never to be brought back again” if Iran does not meet his deadline at 8pm (10am AEST) to open the Strait of Hormuz. But stocks rallied at the end of trading after Pakistan’s prime minister urged Trump to extend his deadline for another two weeks and asked Iran to open up the strait for two weeks.

The S&P 500 erased all its losses and ended with a modest gain of 0.1 per cent. The Dow Jones Industrial Average dipped 85 points, or 0.2 per cent, and the Nasdaq composite added 0.1 per cent.

They’re the latest swings to hit financial markets since late February because of deep uncertainty about when the fighting may end. During just the first hour of Tuesday’s trading, the Dow careened between a gain of 74 points and a loss of 425.

Oil prices were likewise shaky. The price for a barrel of benchmark US crude to be delivered in May briefly climbed above $US117 ($168) before settling at $US112.95, up 0.5 per cent.

The price for a barrel of Brent crude, the international standard, to be delivered slightly later in the year, in June, eased by 0.5 per cent to $US109.27. But it’s still well above its roughly $US70 ($100) level from before the war began in late February.

Oil prices have spiked because the war has snarled the production and transportation of crude in the Persian Gulf. Much of that oil exits the gulf through the Strait of Hormuz to reach customers around the world, but Iran has blocked it to enemies.

The worry in markets has been that a long-term disruption will keep oil prices high for a long time and send a painful wave of inflation crashing through the global economy. Iran on Monday rejected the latest ceasefire proposal and instead said it wants a permanent end to the war.

So far in the war, Trump has made a series of threats to blow up Iranian power plants if it doesn’t open the Strait of Hormuz, only to delay it several times. The possibility remains that Trump could back down again, among other scenarios, which is keeping uncertainty high.

A year ago, Trump ultimately backed off many of the stiff tariffs that he initially threatened to put on imports from other countries, though they ended up higher than from before his second term.

“Investors are likely to remain on edge and markets unable to establish trends, probably until there is a clear outcome later this evening: a deal, the US/Israeli strikes intensify, or Iran’s retaliation becomes escalatory instead of proportional,” according to Paul Christopher, head of global investment strategy at Wells Fargo Investment Institute.

On Wall Street, companies with big fuel bills fell to some of the sharpest losses as high oil prices cranked up the pressure.

Norwegian Cruise Line Holdings dropped 4.8 per cent, and United Airlines sank 3.6 per cent.

Companies whose customers may have the least room to absorb the recent jump in gasoline prices also struggled. Dollar Tree slid 5.1 per cent, and Dollar General fell 2.3 per cent.

The average price for a gallon of regular petrol across the United States has leapt to $US4.14, according to AAA. It was below $US3 a couple days before the United States and Israel launched attacks to begin the war in late February.

In stock markets abroad, indexes fell across much of Europe. Asian stock indexes were stronger, with South Korea’s Kospi up 0.8 per cent for one of the world’s bigger gains.

In the bond market, Treasury yields held relatively steady ahead of Trump’s looming deadline. The yield on the 10-year Treasury held at 4.34 per cent, where it was late Monday.

That’s well above its 3.97 per cent level from before the war, and the rise has pushed up rates for mortgages and other loans going to US households and businesses, which slows the economy.

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