ASX 200 extends losses on rising geopolitical tensions

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Index Update:  The Australian share market extended losses to a fifth day on Monday as investors weighed rising geopolitical tensions following U.S. strike on Iran’s nuclear sites over the weekend. The S&P/ASX 200 dropped 30.60 points, or 0.36%, to close at 8,474.90, slipping below its 20-day moving average. The index has fallen 0.85% over the past five sessions and now sits 1.90% below its 52-week high. Market sentiment was mixed, with eight of 11 sectors ending lower. Financials outperformed, gaining 0.33% on the day and 0.28% over the last five days, while energy stocks saw modest support amid a spike in oil prices.

Macro Update: U.S. strikes on Iran’s three main nuclear facilities have intensified geopolitical tensions. The potential scale of Iran’s retaliation now poses a major risk, with global markets watching closely. Institutions like the World Bank and International Monetary Fund have recently lowered growth forecasts, citing persistent uncertainty. Meanwhile, central banks in the U.S., U.K., and Japan kept interest rates steady last week, opting for caution amid rising instability and ongoing Middle East conflict concerns. A spike in oil and gas prices or disruptions in trade routes could further slow economic recovery.

Top Market Movers: Viva Energy Group (ASX: VEA) topped the gainers on Monday, advancing AUD 0.09 or 4.35% to close at AUD 2.16, supported by strength in the energy sector. Metcash (ASX: MTS) followed with a gain of AUD 0.10 or 2.70% to AUD 3.80, while Reece (ASX: REH) rose AUD 0.37 or 2.28% to end at AUD 16.57. Among the decliners, Bellevue Gold (ASX: BGL) slumped 6.38% to AUD 0.88, Brambles (ASX: BXB) fell 5.01% to AUD 23.33, and Mesoblast (ASX: MSB) declined 4.57% to AUD 1.565.

Commodity Update: The U.S. dollar edged up on Monday as investors sought safety amid Middle East tensions and waited for Iran’s response to U.S. strikes on its nuclear facilities. Gold slipped 0.16% to USD 3,380.95, while silver rose 0.09% to USD 36.05. Copper dipped 0.21% to USD 9,634.40. Brent crude jumped 1.92% to USD 78.93, its highest since January, as U.S. support for Israeli attacks on Iran fueled supply concerns.

Our Stance: The Australian share market’s dip on Monday, with the S&P/ASX 200 closing 0.36% lower at 8,474.90, signals growing investor anxiety as geopolitical tensions mount. While the broader index remains just shy of its 52-week high, markets are shifting to risk-off mode, with eight of eleven sectors in the red despite resilience in financials and energy. The U.S. strikes on Iran's nuclear facilities have amplified global instability at a time when central banks are treading carefully and growth forecasts are being downgraded. Oil prices are surging, trade route disruptions loom, and investor sentiment is increasingly fragile. Markets are no longer just watching inflation or rate decisions; they're bracing for potential conflict escalation and its economic fallout. 

The S&P/ASX 200 Index endured a challenging session, closing down 30.60 points and forming a bearish candlestick pattern amid higher trading volume. Despite this pullback, the index continues to trade above its 50-period Simple Moving Average (SMA) on the daily chart a critical support level. Notably, key support is identified near 8,420.50, a level closely monitored by market participants. Holding above this threshold could help consolidate recent gains and reinforce confidence in the index’s upward trajectory. Additionally, the index’s position above the 21-period SMA on the weekly chart signals the potential for sustained bullish momentum. The alignment of these technical indicators across timeframes underscores the index’s resilience and supports a broadly positive outlook despite short-term volatility.