• Markets rattled as geopolitical conflict intensified
  • Oil stocks are in focus
  • And how investors should play the geopolitical tensions

 

Aussie shares are set to fall on Monday amid the escalation of the war in the Middle East. At 8am AEDT, the ASX 200 index futures contract was pointing down by -0.60%.

On Friday, the S&P 500 fell by -1.46%, the blue chips Dow Jones index was down -1.24%, and the tech-heavy Nasdaq tumbled by -1.62%.

There are fears the Middle East war could break out into a wider conflict after Iran launched more than 200 drones and missiles on Sunday at Israel. Israel is now reportedly drawing up plans to strike back.

Asset prices moved following the development. Brent crude rose above US$92 a barrel before pulling back to trade at US$90.40/barrel right now.

“If Iran enters the war in Gaza, it will significantly disrupt the oil supply chain,” Rania Gule at XS.com said. “As the third-largest oil producer in OPEC, its direct involvement in the war will lead to significant movements in the oil market and have a positive impact on oil prices.”

Bitcoin and other cryptocurrencies tumbled as an initial reaction to the attacks, with BTC now trading at US$65,212. The Aussie dollar also slipped below US65c at US64.70c.

To stocks, investors digested the first batch of US bank earnings on Friday. Citigroup, JPMorgan, and Wells Fargo all reported Q1 earnings that beat estimates.

BlackRock’s stock price fell -2% despite client assets growing to a record US $10.5 trillion after US$76 billion of net inflows in Q1.

Microchip stocks mostly fell after Beijing ordered its telecom carriers like China Mobile to replace foreign chips in their networks by 2027.

The week ahead will see some important releases including Australia’s unemployment rate on Thursday, and US retail sales later tonight.

 

How investors should play the geopolitical tensions

Iran’s attack on Israel over the weekend was unprecedented, and is likely to move stock markets, the US dollar and oil prices further when US markets open on Monday.

A note from Liberium says its base case is a scenario where Israel retaliates, but then things calm down again and equity markets recover after a setback.

“However, there is substantial risk that oil prices will trigger another acceleration in inflation forcing central banks to postpone rate cuts,” noted Liberium.

“There is even a substantial risk that the US might be dragged against its will into a war with Iran.

“Given the wide range of possible outcomes, we think investors should not be underweight oil & gas, look for opportunities in defence contractors, and focus on companies with large revenue exposure to the US and the US dollar in their portfolios.”

 

In other markets …

Gold price rose by +0.4% to US$2,353.73 an ounce.

Brent crude rallied to US$92 a barrel before retreating to US$90.53 at the time of writing.

The benchmark 10-year US Treasury yield fell by 7bp (bond prices higher) to 4.52%.

Iron ore price climbed +1.3% to S$106.05 a tonne.

The Aussie dollar fell -1% to US64.73 cents.

Bitcoin meanwhile was up +4% in the last 24 hours to US$65,340.

 

5 ASX small caps to watch today

De.mem (ASX:DEM)
De.mem reported that it has passed all National Sanitation Foundation (NSF) test procedures in the US under NSF Standard 53, for its Graphene Oxide enhanced membrane technology. All technical requirements for the certification are fulfilled and De.mem expects to be officially listed on the NSF website within the coming weeks. The certification enables immediate commercialisation of USA domestic water filtration market opportunity through existing Purafy distribution partnership.

Western Yilgarn (ASX:WYX)
WYX provided an update on the company’s Boodanoo Project located ~90km south of Mount Magnet in WA. A ~2km long gold in soil target (up to 66ppb) was defined following a historical data review by the WYX team. The gold target trends north directly into a nugget field held by others under a prospecting licence within the lease. Geochemistry and mapping will commence in late April to refine and extend the gold target.

Lincoln Minerals (ASX:LML)
The Kookaburra Graphite Project (KGP) Total Resource has increased by 114% since September 2023. Mineral Resource Estimate is now at 12.8Mt @ 7.6% TGC for a total of 973,000 tonnes of contained graphite, confirming KGP as the second largest graphite resource on the Eyre Peninsula. Lincoln plans additional drilling at KGP in 2024, aiming to further extend known mineralisation and test new high impact step-out targets.

Hot Chili (ASX:HCH)
HCH says it has submitted a second maritime concession application to support a potential multi-user water network for the Huasco valley area of the Southern Atacama region of Chile. Importantly, Hot Chili’s second maritime concession application also includes brine discharge for potential seawater desalination operations on the Huasco coastline so that both raw seawater and desalinated water could be provided by a potential water network. The company is also preparing to transfer its water assets into a new stand-alone water company controlled by Hot Chili.

Talga Group (ASX:TLG)
Talga announced the completion of the front-end engineering and design (FEED) for its integrated Vittangi Anode Project located in northern Sweden. The anode production process has been configured and qualified to customer requirements, facilitating battery maker and automotive OEM offtake negotiations. Strategic agreements with project partners ABB and Rejlers are in place, and preparation for engineering and PCM tenders, along with procurement, is well advanced.

 

At Stockhead we tell it like it is. While Western Yilgarn and Hot Chili are Stockhead advertisers, they did not sponsor this article.

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