ASX falls sharply, oil hits two-month high amid US-Iran strikes

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Topic:Financial Markets

The Australian share market is recording heavy losses after the US military conducted fresh strikes against Iran, driving oil prices to a two-month high.

This contributed to a global bond sell-off and significant losses on Wall Street amid inflation concerns.

See how the trading day unfolds on our blog.

Disclaimer: this blog is not intended as investment advice.

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By David Chau

Prices current at around 10:15am AEST

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By Gareth Hutchens

Once again, analysts have different interpretations of what today's GDP data means for interest rates:

Krishna Bhimavarapu, APAC Economist, State Street Investment Management:

"Today’s GDP data surprised our bullish expectations ... Absent another negative surprise in the August employment data, there are high chances of a September RBA hike now, particularly with the Fed, ECB and the BoJ also leaning hawkish."

Wee Khoon Chong, Senior APAC Market Strategist at BNY:

"The data point to resilient underlying activity, while still-sticky inflation keeps the prospect of further policy tightening alive, even if the RBA is likely to stay on hold in September pending clearer labour market signals."

David Bassanese, BetaShares chief economist:

"Ultimately, the jury remains out on a September rate decision. The saving grace from the economic rut revealed by these numbers is they do not compel the RBA to raise rates, but they also do not rule out a hike in the future. My base case is that September will not bring a rate increase, as the RBA will want to see more evidence on inflation and the moderation in house prices."

Key Event

By David Chau

The ABC understands it will take another 24 hours for voluntary administrators to secure a short-term funding package for Bathla Group, given the complexity of the group’s corporate structure.

The immediate concern for administrators is to meet tomorrow’s payroll, so employees can be paid on time, and once a short-term funding package is agreed it will provide enough breathing room to secure a longer-term funding package to support the progress and completion of the 45 projects currently under construction.

Here is the link to last night's article:

By Gareth Hutchens

Marcel Thielant from Capital Economics has this to say about the GDP data:

"With GDP growth and inflation holding up better than the RBA had anticipated, the bank will probably hike rates again before long, perhaps as soon as this month.

"The 0.4% q/q rise in Q2 GDP was a touch stronger than the analyst consensus and the RBA’s forecast of 0.3%, let alone our own forecast of unchanged output.

"And due to revisions to previous quarters, the annual growth rate only slowed from 2.5% to 2.1%, leaving it above the RBA’s forecast of 1.9%.

He says it's noteworthy that public demand only rose by 2.1% over the past year instead of the RBA’s forecast of 3.6%, so that "should allay the bank’s concerns that runaway public spending is boosting price pressures".

But he says household consumption rose by 0.4% q/q for the second consecutive quarter, in line with the RBA’s forecast, and while private investment ground to a standstill following the surge in Q1 the RBA had been expecting a sharp fall.

"While the minutes of the RBA’s August meeting sounded hawkish, a rate hike isn’t a done deal yet," he says.

"After all, the labour market is now clearly loosening and revised data show that the housing downturn has accelerated.

"The key point though is that the economy is still growing close to trend, which means that the existing excess capacity isn’t being eroded. If anything, the monthly data on household spending suggest that consumption is accelerating rather than slowing.

"With inflation remaining stubbornly high, we now believe that the bank will deliver another rate hike, perhaps as soon as this month."

By Gareth Hutchens

The slowdown in the annual rate of GDP growth, from 2.5% in the March quarter to 2.1% in the June quarter, was slightly ahead of economist forecasts.

In its most recent official forecasts, the Reserve Bank had the rate of growth sitting at 1.9% in June, and then falling to 1.4% by the end of December, as shown below:

Grace Kim, ABS head of National Accounts, says about today's data:

"Economic growth remained subdued in the June quarter as households continued to behave cautiously.

"While increased spending and business investment occurred in pockets of the economy, imports supported much of the growth, moderating its contribution to overall GDP growth"

By Gareth Hutchens

Australia's gross domestic product (GDP) rose 0.4 per cent in the June quarter 2026 and by 2.1 per cent compared to June quarter 2025, according to new data from the ABS.

Key Event

By Kate Ainsworth

Telstra CEO Vicki Brady has confirmed there were a further eight unsuccessful Triple Zero calls made during its July outage.

That disclosure is on top of the previously reported hundreds of unsuccessful Triple Zero calls made.

Ms Brady confirmed the number during a media briefing this morning after releasing the findings of its independent investigation into the outage.

Of the eight calls:

Ms Brady also reiterated that all of these calls had since received the required checks, and stressed that were had been "no adverse outcomes" related to them.

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By David Chau

Only 38 out of 200 stocks are trading higher today, so that's most of them down.

Today's best performers include GrainCorp (+8.4%), IAG (+2.2%), Telstra (+1.6%) and Woodside Energy (+1.6%).

The huge gain in GrainCorp's share price appears to be linked with Bell Potter and Macquarie upgrading their price targets for that stock to at least $7.10.

It's currently trading at $6.79, which suggests those brokers are feeling very bullish about GrainCorp.

Key Event

By Kate Ainsworth

The long-awaited report into what caused Telstra's national outage on July 8 has dropped this morning, with the investigation finding two of the telco's key engineers responsible were on mandatory leave at the time.

The outage was triggered at 2:50am after a faulty power supply was replaced and reset a timing mechanism, which resulted in a date change that flowed through the network.

It resulted in hundreds of people being unable to call Triple Zero, small businesses being unable to use EFTPOS, and stopped trains in NSW and Victoria.

The independent external review, conducted by Technology Audit Partners, found that there was "not sufficient knowledgeable staff" who could identify the error in the timing system that caused the outage, and the alarms that picked up the issue were only checked during business hours.

On a media briefing call this morning, Telstra CEO Vicki Brady accepted the findings and said the telco is focused on implementing changes to ensure the outage doesn't happen again.

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By David Chau

Some of today's worst performing stocks are gold miners.

That was after the precious metal's spot price dropped to a one-month low of $US4,314 an ounce.

It's because the odds of a US Federal Reserve interest rate in September have risen to around 68%.

Higher rates is bad news for non-yielding assets like gold and other lumps of metal.

Pantoro Gold, Westgold and Kingsgate shares are faring poorly, with losses of around 6% to 7.5%, while copper miner Capstone Copper (-8%) is also being sold off.

The iron ore mining giants, however, have a bigger weighting on the share market.

Shares of BHP (-3.4%), Rio Tinto (-2%), and Fortescue (-3.2%) are also down sharply.

By Gareth Hutchens

G’day Michael. Always interested in Gareth’s articles. He’s been concentrating on the thought processes of billionaires for a while. I find Gil Duran’s thoughts a bit obvious though. We all have our view on how the world should be run and certainly if I was a billionaire I’d be using my money to promote my viewpoint as I think we all would. As far as attacking democracy goes , we don’t have it at the moment. We don’t select the Governor General or the Prime Minister and we have no power to enforce the commitments made by politicians. We should be using technology to swivel from a ‘parliamentary’ democracy to a ‘direct’ democracy where citizens vote online on legislation proposals , using individual myGov id , removing vast layers of bureaucrats and legislators and preventing the billionaire intervention Durán fears.

- Phillip

Thanks Phillip.

I'd be really interested in your thoughts of the book, if you end up reading it. It provides far more detail about the history of their ideas, and how their ideas have evolved, than I could fit into that piece.

Regarding your idea of direct democracy, the economist Nicholas Gruen has been steadily thinking his way through possible ways to make our democracy more effective (on substack), which I think you'd appreciate.

e.g. this piece.

Key Event

By David Chau

The Australian share market's losses have worsened after its first hour of trade.

The ASX 200 is down 1.4% to 8,939 points.

The broader All Ords index is doing a bit worse. It has fallen 1.5% to 9,127 points.

Almost every sector is trading lower, with materials (-3%) and industrials (-2.3%) still the worst performers.

The only sector doing really well is energy (+0.5%), thanks to the 5% surge in oil prices overnight as US-Iran hostilities escalated significantly.

Key Event

By David Chau

The head of a major US investment firm says those adopting AI now are already starting to see some productivity gains, though it can be "hit and miss".

On last night's The Business, host Kirsten Aiken interviewed Northern Trust Asset Management's president Michael Hunstad who manages $US1.8 trillion worth of funds.

Kirsten asked him whether the cost of establishing data centres and buying into AI technology will make the fight against inflation more difficult for business,

"I think over the short term that may be true, but over the longer term I'm a firm believer that AI may be the biggest positive supply shock that the global economy has ever seen," Mr Hunstad said.

He added that will ultimately be deflationary in the sense it will "bring unit price costs down".

You can listen to their full interview here:

Key Event

By David Chau

As I mentioned earlier, Australia's long-term borrowing costs have risen to their highest level since 2011 due to the bond sell-off.

The yield on the government's 10-year bond yield has risen to 5.19 per cent.

If you want to know why this is bad news and how it affects your mortgage and other interest rates, here's a great explainer by David Taylor:

Key Event

By David Chau

A sell-off in global bond markets has worsened, reflecting investor angst over inflation and government debt levels that stand to inflict fresh pain on consumers and businesses.

When investors sell their bonds they're essentially demanding higher compensation for what they see as higher inflation risks.

That causes the bond price to fall and its yield, or interest rate, to rise. And it leads to higher borrowing costs for governments.

Here's what's happening on bonds across several countries:

Some of the world's leading economies, notably the US, have sharply increased their debt loads in recent years through deficit spending, with US debt hitting $US40 trillion.

This structural deficit will be difficult to remedy without tough choices by the US government. For instance, spending cuts and rolling back tax cuts for the wealthy may be options, but they would be politically unsavoury.

On top of that, wars from Russia-Ukraine to the Middle East have sent oil and gas prices higher, adding to pressure on interest rates and the cost of living.

- with Reuters

Key Event

By David Chau

We're just over five minutes into the trading day and the Australian share market is already off to a bad start.

The ASX 200 index has fallen 1.1% to 8,968 points.

Almost every sector is trading lower, with materials (-2.7%) and industrials (-2.1%) being the worst performers.

On the flip side, the energy sector (+1.4%) is soaring after the latest US-Iran escalation pushed oil prices to their highest level in two months.

Key Event

By David Chau

Property prices have dropped for a fifth straight month, with the slump unlikely to be ending any time soon. Especially if the Reserve Bank lifts interest rates again, which is seen as likely to happen.

The property price downturn has also spread to around 93% of Australia's capital city suburbs, according to the latest data from Cotality.

The housing market has been hit by several headwinds including three RBA's interest rate hikes this year and the federal government's decision to restrict negative gearing and increase capital gains tax.

For more, here's the story by Jasper Wells:

By David Chau

If you need a refresher before the ASX opens for trading, I can certainly recommend Alan Kohler's finance report.

Among other things, Alan talked about why the Australian government's long-term borrowing costs have surged to a 15-year high and house prices are falling for a fifth straight month.

Key Event

By David Chau

In less than an hour the Australian share market will start trading and it will likely be a fairly significant loss.

ASX futures are pointing to an opening fall of around 0.9%, though there's a chance it might not be that bad.

"The catalyst for the sudden shift in sentiment stems from escalating Middle East tensions following strikes near the Strait of Hormuz, raising immediate concerns over potential bottlenecks in critical global shipping channels," said Moomoo Australia's chief market strategist Tapas Strickland.

"Higher energy costs risk re-igniting headline inflation just as central banks seek confirmation that price pressures are contained.

"While higher bond yields are expected to weigh on rate-sensitive growth stocks, banks, and real estate, local energy producers and materials heavyweights should offer critical support as elevated crude and firm commodity prices keep resources in demand."

If the ASX follows the trends on Wall Street overnight, then it looks like tech stocks will perform badly while oil and gas stocks should do well.

"US technology stocks led the overnight retreat, with notable sell-offs in CrowdStrike, Dell, and Cadence Design, which all dropped more than 6.5%, alongside declines in Tesla (-3.2%) and Palantir (-3.5%)," Mr Stickland said.

"However, the session was not entirely one-directional; defensive and energy-exposed names provided counterweight, with Exxon Mobil gaining 2.2%, Johnson & Johnson rising 2%, Moderna surging 10%, and Apple climbing 2.6%.

"The divergence highlights an increasingly selective market environment where high-multiple tech bears the brunt of yield pressures."

By Michael Janda

A really interesting column from Gareth Hutchens based on an interview he did last week with US journalist and author Gil Durán, who has recently published The Nerd Reich: Silicon Valley Fascism and the War on Democracy.

The title really sums up Durán's thesis, which is that many tech billionaires want to usher in a post-democracy era, where they control their own pockets of society.

This is well worth a read and we're interested in your thoughts. Please share in the comments.

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