Uncertainty Remains, Australia’s Response to Oil Shock

Global markets remained volatile this week as uncertainty surrounding the conflict in the Middle East persists. Trading on Thursday morning was turbulent following Donald Trump’s national address on Wednesday night, raising expectations of a potential reopening of the Strait of Hormuz.

Despite the volatility, US markets rebounded, with the S&P 500 rising 3.4% for the week - its first positive week since the war began on February 28. 

Trump has since double downed on his proposed deal with Iran, delivering a direct ultimatum via his platform Truth Social:

While markets responded positively, investors should remain cautious. Trump’s aggressive and optimistic stance highlights how quickly sentiment can shift, with markets reacting to political issues as opposed to underlying fundamentals. Key pressures including higher interest rates, persistent inflation and climbing oil prices still remain firmly in play.

Australia Feels the Pressure

In Australia, Prime Minister Anthony Albanese delivered a rare national address, warning that the three months ahead “may not be easy”. Fuel supply issues quickly became a focal point, with Australians urged to not “take more than you need” amid signs of panic buying.

Current Fuel Reserves (as of April 4) (see more here:)

To ease the cost-of-living pressure, the government announced:

However, while easing short-term prices at the pump, these measures do nothing to address the underlying supply constraint. If the Strait of Hormuz remains disrupted, Australia will experience a prolonged period of increased fuel prices.

Key industries across the economy will be affected:

Higher fuel prices are likely to fuel inflationary pressures, reducing the likelihood of interest rate cuts in the near term.