Australia’s financial markets experienced significant turbulence on Thursday as escalating oil prices and mounting expectations of interest rate increases triggered a massive selloff. The benchmark ASX 200 index plummeted 114.50 points, representing a 1.31% decline to close at 8629 points, while the broader All Ordinaries index dropped 125.40 points (1.40%) to settle at 8851.40. This dramatic downturn erased approximately $40 billion from the local market valuation.
The market’s negative sentiment was predominantly driven by Brent crude oil prices surpassing $100 per barrel during Asian trading hours. The energy sector emerged as the sole beneficiary of this development, with Woodside Energy gaining 2.07% to $31.05, Santos advancing 1.49% to $7.49, and Ampol climbing 2.89% to $30.27.
Conversely, major mining corporations faced substantial pressure, with BHP declining 1.89% to $50.90, Rio Tinto falling 1.42% to $153.09, and Fortescue dropping 1.50% to $19.68. The banking sector similarly suffered losses, with Commonwealth Bank decreasing 0.62% to $171.60, National Australia Bank sliding 1.96% to $46.40, Westpac retreating 1.19% to $40.54, and ANZ slumping 2.53% to $37.02.
Market analysts attribute this volatility to growing concerns that rising energy costs will exacerbate inflationary pressures, potentially forcing the Reserve Bank of Australia to implement multiple interest rate increases. IG market analyst Tony Sycamore noted that markets are now pricing in 68 basis points of rate hikes by year-end, citing heightened consumer inflation expectations and hawkish commentary from RBA officials.
Money markets currently indicate a 76% probability of an interest rate hike following next Tuesday’s RBA meeting. The Australian dollar strengthened marginally against the US dollar, trading at 71.33 US cents amid expectations of domestic monetary tightening.
In corporate developments, Collins Foods surged 5.2% to $9.92 after announcing expansion into the German market through the acquisition of eight new restaurants in Bavaria. Conversely, IperionX shares collapsed 14.29% to $6.12 following the release of half-year results showing net losses doubling to US$34.8 million (A$49 million).