The US/Israel conflict with Iran is creating turbulence across global markets, with oil supply risks driving sharp price swings and dampening investor sentiment.
Key Points
- Oil volatility intensifies: Prices spiked to US$119 before retreating, as uncertainty surrounding the duration of the conflict remains high.
- Economic pressure builds: Higher oil and gas prices risk slowing global and Australian growth, with households facing rising petrol costs and weakening confidence.
- Inflation impact: Oil at ~US$100 could add around 0.8% to Australian inflation, pushing it to ~4.6% annually.
- RBA outlook: The central bank is expected to wait until May before making a rate call, maintaining a hawkish tone in the meantime.
- Shares slide: Concerns over inflation, rates, and slower growth have pushed global equity markets lower.
- Two war scenarios:
- Limited war (60%): Oil may rise further short‑term but fall once tensions ease.
- Long war (40%): Prolonged supply disruptions could send oil above US$150 and deepen market declines.
Investors are encouraged to stay focused on long‑term strategy rather than short‑term volatility.
Please see the full article for more of Shane Oliver’s thoughts and further detail.
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About the Author
Dr Shane Oliver, Head of Investment Strategy and Chief Economist at AMP. He also provides economic forecasts and analysis of key variables and issues affecting, or likely to affect, all asset markets.
Important note: While every care has been taken in the preparation of this article, AMP Capital Investors Limited (ABN 59 001 777 591, AFSL 232497) and AMP Capital Funds Management Limited (ABN 15 159 557 721, AFSL 426455) makes no representations or warranties as to the accuracy or completeness of any statement in it including, without limitation, any forecasts. Past performance is not a reliable indicator of future performance. This article has been prepared for the purpose of providing general information, without taking account of any particular investor’s objectives, financial situation or needs. An investor should, before making any investment decisions, consider the appropriateness of the information in this article, and seek professional advice, having regard to the investor’s objectives, financial situation and needs. This article is solely for the use of the party to whom it is provided.