The Australian sharemarket has plummeted after oil prices hit $US101 ($140) a barrel.
About $32 billion was wiped off Australian shares on Thursday as escalating tensions in the Middle East raised concerns about energy supplies.
About $32 billion was wiped off Australian shares. Getty Images
The tensions have added to expectations the US Federal Reserve will raise interest rates to contain inflation.
The ASX200 was down 1 per cent to 8819 points at the close.
Resources was the hardest-hit sector, falling nearly 2.5 per cent in early trade.
That’s despite copper reaching a record $US14,858.50 a tonne on the London Metal Exchange this week.
“Oil is smashing the Australian market,” said Global X ETFs investment strategist Justin Lin.
“Investors are being forced to confront the prospect that inflation could remain higher for longer and that the Reserve Bank of Australia may have more work to do.
“For an economy already dealing with sticky inflation, another meaningful increase in energy costs is exactly what the market does not want to see.”
Lin said the materials sector could come under pressure as reflected in today’s price action, which has been “the ASX’s major bright spot over the past year”.
“Higher metal prices have been enormously supportive for the miners, but if $US100-plus oil reignites global inflation, forces central banks to tighten further and ultimately slows economic growth, demand for industrial commodities could begin to soften materially,” Lin said.
“The stagflationary tail risk that lingered in the background has been brought back to the fore.”
BHP shares were down three per cent, while Fortescue was down 2.2 per cent and Rio Tinto sat at 3.3 per cent.