Australian shares closed marginally lower on Tuesday, with the S&P/ASX 200 index falling 0.2% to 8,680.50, according to The Economic Times. This followed Monday's decline of 0.4%, extending losses from the previous session. The benchmark fell as much as 0.9% earlier in the session before paring most of its earlier losses. Market sentiment remained cautious as investors grappled with sticky inflation concerns and an oil-driven price surge stemming from the Iran conflict.
The Reserve Bank of Australia delivered its widely expected 25 basis points rate hike to 4.35%, marking the third consecutive increase this year and reversing all of the easing delivered in 2025. As per The Economic Times, the central bank factored in two adverse scenarios where the Strait of Hormuz remains closed, delaying shipping flow resumption until early 2027. The RBA also downgraded its economic growth forecast, citing the global oil shock from the Iran conflict. Market analyst Cliff Man from ETF Shares noted that markets are pricing in a longer Iran conflict, with high energy costs keeping inflation elevated and raising the risk of broader RBA tightening, rather than a one-off hike. However, Prashant Newnaha from TD Securities suggested there was little to indicate the central bank was positioned to move again at its next meeting.
Financial stocks experienced significant declines, with the sector falling 0.5% on the day, weighed down by a near 2% drop in Westpac. The country's second-largest home lender reported a weaker-than-expected first-half profit and warned that mortgage and business customers are facing pressure from higher energy and fuel costs linked to the U.S.-Iran conflict. As per The Economic Times, the banking sector weakness was primarily driven by National Australia Bank's earlier decline, with the lender's shares dropping 1.2% to their lowest since August 18 after posting a first-half cash profit of $2.64 billion that missed analyst expectations. The RBA's warning that inflation could remain sticky, citing the global oil shock from the Iran conflict, added to sector concerns.
Mining stocks followed the financial sector's weakness, with the sector slumping 0.5%, as reported by The Economic Times. Major mining companies BHP and Rio Tinto declined 0.4% and 0.3% respectively. Gold stocks were particularly hard hit, losing 0.8%, with Regis Resources shares slipping 5.9% after a merger deal with Vault Minerals. The mining sector's decline reflects broader concerns about global economic growth and the impact of geopolitical tensions on commodity demand.
Bucking the broader market trend, energy and technology stocks demonstrated strong performance, with each sector adding 0.9% and 0.8% respectively, according to The Economic Times. The energy sector's outperformance came despite oil trading near $108 a barrel following President Trump's announcement about guiding neutral vessels through the Strait of Hormuz. Technology stocks were primarily buoyed by a 1.3% steady gain in software provider Xero Ltd and a notable 6.1% surge in shares of Life360 Inc. The sector's resilience provided some stability to the overall market amid challenging conditions, with gold prices falling 0.12% to $4,606.80 and Brent oil prices rising 0.29% to $108.48 a barrel.
