A long war in the Middle East might not just be an energy story – for the Australian sharemarket, it could become a cost-of-living, inflation, and interest-rate story too.
The first-round winners have been obvious enough: oil, gas, and LNG producers. The more interesting question now is who gets pummelled if the shock lingers.
The Iran war could push up commodity prices, keep inflation sticky, and force interest rates higher than markets had hoped. In Australia, the war has already shifted expectations for the Reserve Bank, with markets pricing in a strong chance of another rate rise as oil feeds into inflation risks.
