Issue #8 | Markets Slide on Middle East Tensions

Global Markets - Markets React to Ongoing Middle East Conflict
ASX - ASX this week, Top 3 Winners & Losers
Deals Down Under - Magellan/Barrenjoey $1.6bn Merger
Other News - Aussie Politics, Sport, Culture and more

More than a week after the United States and Israel launched strikes on Iranian nuclear and military infrastructure, the conflict is sending shockwaves through global markets.

Energy markets reacted sharply after Iran effectively closed the Strait of Hormuz, the narrow waterway through which around 20% of global oil supply passes. Brent crude surged almost 5% to about US$85 a barrel, while West Texas Intermediate jumped 8.5% to US$81, as attacks on regional infrastructure forced shutdowns of Qatar’s LNG industry and parts of Iraq’s oil sector.

Because oil underpins transport, logistics and manufacturing supply chains, sustained price increases can push up the cost of goods across the global economy, raising concerns that inflation could accelerate again.

Global markets have already started to adjust. The S&P 500 fell 1.3% and the Dow dropped 3% for the week, while the ASX 200 slid 1.3% on Friday, extending losses this week. In bond markets, the US 10-year yield climbed, with traders now assigning a 25% probability that the Federal Reserve delivers no rate cuts this year.

With Iran continuing retaliatory strikes despite signalling restraint, investors now face a key question: whether energy supply disruptions prove temporary, or whether escalating tensions push oil, inflation, and interest rates higher for longer.

The financial impacts of the Middle East conflict spread to Australia with the ASX 200 falling 3.8% for the week, its largest drop since Trump’s “Liberation Day” tariffs in April last year. The severe drop erased all of February’s 3.7% gain, as supply concerns in global energy markets and rising geopolitical tensions pushed investors toward a more cautious stance.

The week’s best performers on the ASX 200 include:

In contrast, the worst performers on the ASX 200:

The two best performers, Viva Energy and Droneshield were no surprise, with the Middle East conflict a catalyst for their surge. With oil prices climbing sharply, Viva Energy profited like most other energy stocks this week. Droneshield, an Australian defence technology company that specialises in counter-drone systems and electronic warfare solutions bounced 12.43%, as escelating geopolitical tensions raised defence spending around the world.

Miners led the fall this week with the top 3 losers representing uranium, gold and copper producers respectively. Deep Yellow’s drop was due to their poor half-year results reporting a A$7.78m loss, tripling its A$2.47m loss in the previous period.

Catalyst Metals and Sandfire Resources fell amidst the global commodity slump with gold and copper dropping along with other commodities such as silver and lithium.

Outside of the top 3 worst performers, Australia’s aviation sector also came under pressure after major airlines and airports suspended operations across parts of the Middle East. Australia’s Qantas tumbled 10.35% for the week. While Virgin slipped 7.64% and Flight Centre also fell 5.66%.  

Magellan Financial Group has agreed to acquire the remaining two-thirds of Barrenjoey Capital Partners it does not already own, bringing the fast-growing investment bank fully under Magellan’s umbrella.

The surprise merger follows strong performance from Barrenjoey, whose net profit doubled last year. The investment bank delivered $522 million in revenue and $108 million in adjusted profit, highlighting the rapid growth of the five-year-old firm.

Under the deal, Barrenjoey staff will receive 92.6 million Magellan shares worth roughly $782 million at the $8.45 merger price. Employees will own 31.7% of the combined group, while existing Magellan shareholders will hold 63.5%. The transaction remains subject to shareholder approval at an extraordinary general meeting scheduled for April.

Investor confidence strengthened after the Lowy family revealed it had backed the merger by taking a 5.1% stake in Magellan, sending Magellan’s shares up 9% to $11.55.

Strategically, the merger gives Barrenjoey access to a $2 billion balance sheet, enabling it to pursue a credit rating and expand its fixed income trading and advisory businesses.

Magellan chairman Andrew Formica said the combination brings together two entrepreneurial firms with complementary strengths. Analysts say the deal could create a “Macquarie-style” financial services platform, blending funds management, investment banking and trading, and potentially reshaping competition across Australia’s capital markets.

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