Markets are very choppy at the moment with so many conflicting stories and headline havoc in full effect. The world was ending on Monday, war was over on Tuesday and Wednesday had us somewhere in between. That makes for whipsaw moves, which is certainly good for intraday short-term traders. The longer we go without any kind of potential ceasefire, with still minimal shipping traffic and oil flows, it seems the more nervous the market will get. Iran seemingly has the oil price to use as leverage, though inevitably that also harms everyone.
Away from the Middle East, credit concerns are bubbling under, with JP Morgan marking down portfolios due to their exposure to the software sector that could be disrupted by AI. Private credit’s biggest firms like Blackstone have been caught up in the sharp sell-off, as they have increasingly focused on corporate lending over buyouts in recent years. We will be watching for potentially more “cockroaches” as JPM’s Jamie Dimon remarked late last year.
Crude’s historic week
Brent had an astonishing near 30% intraday move on Monday as constant, conflicting headlines hit oil markets. Crude soared through the hugely psychological $100 marker and briefly traded above $116 in thin Asian hours. The war seemed like it was getting worse, not better. Producers in Iraq, Kuwait and the UAE started to shut wells because they couldn’t move crude out, which meant a big hit to supply in a very short time. Even if tankers did start moving through the Strait of Hormuz again, an instantly restart to this production takes time.
Through Monday, major governments and agencies endeavoured to step in with a big, coordinated release of emergency oil reserves. Pressure for that grew the longer crude stayed above 100 and we have now seen the IEA release agreed, though many think this is only a short-term fix. Interestingly, recent positioning showed many speculators actually cutting exposure in Brent. That’s not because the story is bearish, but because the news flow has been so unpredictable. The mix of tight supply and nervous positioning has created big two‑way volatility. The Russia-Ukraine high was just above $130, with other notable tops at $99.05, $95.31 and $91.65. The January 2025 sits at $81.80.
AUD hits near 4-year highs and resistance
AUD has outperformed in recent weeks and it hit near 4-year highs at 0.7187 before paring gains yesterday. Next week’s RBA meeting is in focus with many Wall Street economists now expecting another rate hike. The bank will be ‘compelled to react’ due to the recent oil price strength, while domestic inflation is far beyond the 2-3% target band. Back-to-back RBA rate hikes were also possibly signalled by comments from bank officials recently, who are increasingly concerned over potential inflationary pressures from the Iran war. The aussie has fared relatively well despite the shock caused by the conflcit. This is due to the positive terms of trade dynamics and supportive domestic economic growth. Resitance sits a this year’s high at 0.7147, which is reinforced by the January 2023 peak at 0.7157. A long-term Fib retracement level of the 2021 high to the Apirl 2025 low resides at 0.7203.
Nasdaq outperforms
While stocks haven’t been hit as hard as many expected, US equities have outperformed European and Asian stocks in the past couple of weeks. Sector performance too has rotated again with energy-hungry industrials and material sectors falling after a great run in 2026, as investors move back into technology stocks. Notably too, defensive sectors like healthcare and staples did not get a boost from any haven flows. Instead, tech has taken the lead, and unlike HALO (heavy asset, low obselescence) companies, these firms are typically immune to both commodity shocks and trade disruptions. The tech-laden Nasdaq index fell close to the 200-day SMA at 24,251 before bouncing. Prices are back above a minor Fib level with the 50-day and 100-day SMAs above at 25,248/70.