Australian shares opened sharply lower on Wednesday, September 2, after fresh US strikes on Iran sent oil prices higher and intensified fears that inflation could remain elevated for longer.
The S&P/ASX 200 fell 103.1 points, or 1.1 per cent, in early trading, after slipping 0.1 per cent in the previous session. The Australian dollar also weakened, trading at US71.47¢.
The sell-off followed a difficult session on Wall Street, where the S&P 500 dropped 0.7 per cent, the Dow Jones Industrial Average lost 0.8 per cent and the Nasdaq Composite fell 1 per cent. The three major US indices have now declined for three consecutive sessions. ([apnews.com](https://apnews.com/article/61f03262bb5dfa1c414c4fb7be40772e?utm_source=openai))
Technology stocks were among the biggest fallers, with Nvidia down 1.5 per cent, Amazon off 1.9 per cent and Advanced Micro Devices losing 2.4 per cent. Their large valuations have made them particularly sensitive to higher borrowing costs as investors reassess the prospects for interest-rate cuts.
The immediate pressure came from a renewed bond-market sell-off and a surge in crude prices after the latest US military action in Iran. US Central Command said its forces had struck Islamic Revolutionary Guard Corps targets including air-defence sites, radar systems, maritime assets, mine-laying capabilities and communications facilities.
Brent crude rose 4.6 per cent to settle at US$94.65 a barrel, while US crude climbed 5.2 per cent to US$90.22, closing above US$90 for the first time in more than a month. The Strait of Hormuz, between Iran and Oman, has become a major focus for traders because it normally carries about one-fifth of global petroleum consumption. ([centcom.mil](https://www.centcom.mil/MEDIA/PUBLIC-RELEASES/Article/4588389/centcom-completes-strikes-on-irgc-targets-in-iran/?utm_source=openai))
Disruption to shipping through the waterway has added to concerns about fuel, transport and other costs, threatening to keep inflation above central-bank targets. The prospect of renewed price pressures has led investors to scale back expectations of lower US interest rates and consider the possibility of further tightening.
US government bond yields rose as prices fell. The yield on the 10-year Treasury increased to 4.79 per cent from 4.75 per cent late on Monday, while the two-year yield climbed to 4.39 per cent from 4.34 per cent.
Higher yields raise financing costs across the economy, from mortgages and business loans to the borrowing used to fund growth companies. They can also make bonds more attractive relative to shares, putting further strain on equity valuations.
Investors are also watching the US jobs market and incoming inflation data before the Federal Reserve’s September meeting. Job openings rose slightly in July, while the closely watched monthly employment report for August is due on Friday.
Markets had entered September after a broadly positive August, when all three major US indices recorded monthly gains. But concerns over inflation, government debt and the economic impact of the conflict in the Middle East have quickly returned to the forefront.
The Dow closed at 52,766.88, down 419.02 points, while the Nasdaq ended at 26,099.77. European markets also fell and Asian exchanges finished mixed.
