Markets today: Wall Street falls as oil rises; ASX set to slip

The Australian sharemarket opened lower on Tuesday after a downbeat session on Wall Street, where stocks fell and the price of oil rose after the US launched its first military action in a month against Iran.

The S&P/ASX 200 was down 25.70 points, or 0.3 per cent, at 9050.30 as of 10.45am AEST, with seven of its 11 industry sectors in the red. The local bourse lost 0.2 per cent on Monday. The Australian dollar was trading at US71.75¢.

Wall Street has started the week on the back foot. AP Photo/Yuki Iwamura

Healthcare and energy stocks posted the biggest gains among the four sectors advancing in early trade.

Australia’s biggest pharma stock CSL rose 1.6 per cent after it signed a drug pricing deal with the Trump administration to avoid its punitive tariff regime on foreign-made pharmaceuticals. CSL will provide discounts on outpatient drugs to US Medicaid programs so that the prices US states pay align with what it charges in other countries. The biotech giant has also confirmed its commitment to an $US1.5 billion expansion of its plasma plant in Illinois to appease the US government.

Meanwhile, oil and gas giants Woodside and Santos were both up 0.6 per cent as the war in the Middle East heated up again, pushing up oil prices. US forces struck Iranian rocket launchers on the Strait of Hormuz on Sunday. Meanwhile, the United Arab Emirates said it intercepted an Iranian drone over its waters on Monday. The aggressive actions follow a lull in activity in the war, which has lasted more than six months now.

Brent crude, the international standard, rose 2.7 per cent to $US90.49 per barrel overnight, and traded at $US91 this morning. Brent fell below $US80 earlier in August but has since moved higher with no sign of an imminent end to the war.

The war has curtailed traffic in the Strait of Hormuz, which accounts for about 20 per cent of the world’s oil shipments. Oil prices remain high after an initial surge earlier in the war and that has made everything from petrol to shipped goods more expensive.

On the downside, financial stocks, which make up more a third of the ASX, were lower in early trade, weighing on the market. The big four banks were struggling, with CBA flat, National Australia Bank and Westpac down 0.3 per cent and ANZ Bank down 0.2 per cent.

Consumer-related stocks also declined, with Bunnings and Officeworks owner Wesfarmers down 3.3 per cent, electronics retailer JB Hi-Fi falling 1.6 per cent and furniture seller Harvey Norman dropping 2 per cent. Supermarket giants Woolworths and Coles shed 2.7 per cent and 0.5 per cent.

The interest-rate sensitive tech sector was also lower. Software firms WiseTech and Technology One were down 1.3 per cent and 2.3 per cent, respectively, and AI data centre NEXTDC lost 2.8 per cent.

On Wall Street overnight, news of the latest flare-up in the Middle East and rising bets on interest rate hikes in the world’s largest economy weighed on sentiment. The S&P 500 index fell 0.3 per cent. The Dow Jones Industrial Average dropped 0.7 per cent and the Nasdaq composite slipped 0.1 per cent.

August had no shortage of turbulence for the market, but the S&P 500 and Nasdaq each posted a gain for the month after losing ground in July and June. The Dow, meanwhile, managed its fifth-straight monthly gain.

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The losses overnight were broad, with nearly every sector within the benchmark S&P 500 finishing in the red. Energy stocks, though, notched gains. Exxon Mobil rose 2.7 per cent and Chevron rose 2.1 per cent.

On the losing side, Edison International slumped 23.1 per cent and PG&E fell 20.1 per cent for the two steepest declines. That followed reports about potential California wildfire legislation that would allow insurers to sue utilities over related claims.

Amazon fell 2.5 per cent after The Wall Street Journal reported that the Federal Trade Commission and more than 20 states are preparing to sue the online retail giant over claims the company manipulated prices on its platform.

The rising oil price means it has been the most expensive August for US drivers on record, outpacing even the enormous supply chain crunch during the COVID-19 pandemic in 2022.

Higher energy prices have fuelled already stubbornly high inflation. That has been weighing on household spending and consumer confidence. It has also given the Federal Reserve a more complicated path ahead for its interest rate policy.

The rate of inflation remains well above 3 per cent, which is far beyond the Fed’s 2 per cent target. Wall Street expects the central bank to raise interest rates at least once before the year ends to cool inflation. On Friday, Fed Chair Kevin Warsh said that inflation is still too high and suggested a rate hike might be necessary in the coming months.

The Fed gets its next inflation update on September 11, just days ahead of its next meeting to determine interest rate policy. Wall Street is forecasting a 66 per cent chance that the Fed will raise its benchmark rate at that meeting, according to CME FedWatch.

“While a September hike is not a foregone conclusion, we expect the Fed to have limited tolerance for meaningful upside inflation surprises,” wrote Brock Weimer, investment strategy analyst at Edward Jones, in a research note.

The yield on the two-year Treasury, which closely tracks expectations about Fed moves, held steady at 4.34 per cent, where it was late on Friday. That’s up significantly from about 3.50 per cent at the beginning of 2026.

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The yield on the 10-year Treasury rose to 4.75 per cent from 4.73 per cent. That’s back up around the level seen two weeks ago when the Trump administration took the unusual step of announcing it would intervene in the bond market.

Any increase to interest rates that could cool inflation also risks hurting the jobs market. Later this week, the US reports August jobs data. In July, the US job market stalled unexpectedly as employers cut 23,000 jobs.

Company updates helped move several US stocks. GameStop rose 2.9 per cent after the video game retailer provided a preliminary second-quarter earnings outlook above its year-ago results. Shares of Aon slid 9.5 per cent as the company announced that it was buying insurance broker USI Insurance Services from private equity firm KKR in a deal valued at $17 billion, including debt.

Markets were mixed in Europe and Asia.

with AP, Bloomberg

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