Shares plunge as oil prices rocket to four year high

2026-03-09 - 19:20

The global economy is facing its biggest shock since the depths of the pandemic as oil prices soar to almost US$120 a barrel. It’s wiped billions off equity markets. Fears are growing that the war against Iran could plunge the United States and many other economies into recession. Overnight, oil prices eased back to just under US$100 after finance ministers from G7 countries including the US, UK and Canada said they would take “all necessary” measures to tackle the surge. They stopped short of agreeing to release a quarter of their strategic petroleum reserves, in the emergency meeting. A further meeting is expected to be held on Tuesday to decide a specific course of action, with shipping traffic through the critical Strait of Hormuz still at a standstill. More than 20 percent of global oil and gas supplies are caught up. The fuel sector has warned petrol prices will hit at least $3 a litre in some places soon, if the crude oil price remains above US$100 a barrel. In response, Finance Minister Nicola Willis has hinted at a possible delay to the 18 cents a litre fuel tax hike set to begin next year. Willis told media at Monday’s post-Cabinet press conference that advice from Treasury showed a range of economic scenarios depending on the duration of the war which remained highly uncertain. “As is always the case with prudent Government, we assess the conditions that we face at the time.” Fears have intensified that the war could last for some time after US President Donald Trump said only the “unconditional surrender” of Iran would end its joint military offensive with Israel. At present that surrender appears unlikely. Iran’s interim ruling body of clerics has chosen Ayatollah Mojtaba Khamenei, the second son of the slain supreme leader, as his father’s successor – maintaining the regime’s resolve to remain in power at all costs as it resists the US-Israeli offensive. In a sign of growing regional tensions, Saudi Arabia condemned the continued Iranian attacks on the kingdom and its Gulf neighbours saying they “cannot be accepted or justified under any circumstances.” Trump’s latest plans, said to involve deploying special forces on the ground to seize Iran’s near bomb grade uranium, suggest the US President has no intention of pulling back, for now. After a day of turmoil on financial markets, the NZX50 fell 3.1 percent on Monday to close at 13,098, all but wiping out two weeks’ gains from a better-than-expected earnings season. It was the local market’s biggest one-day fall since early April last year. That downturn was prompted by the Liberation Day tariff announcements. Air NZ shares fell a further 7.8 percent to close at a new 17-year low of just 47c. In total, they’ve dropped more than 20 percent since February 25, as jet fuel prices have surged. Associate energy minister Shane Jones has warned, in an interview with Newsroom last week, of his concerns for the national carrier: “The real urgency will be Air NZ,” he said. “There’s enormous demands now on aviation fuel, not the least of which is the largest military in the world chewing through it like it’s going out of favour.” Auckland Airport shares fell a further 4.3 percent to $8.36, Tourism Holdings fell 5.5 percent to $2.40, and Scott Technology shares declined 7.6 percent as investors feared expenditure on new tech-focused projects would be shelved if economies continue to weaken in the wake of higher oil prices. Even market heavyweight F&P Healthcare wasn’t spared this week’s shares downturn – despite upgrading its earnings outlook recently – with its shares falling 4.8 percent to $38.00. The events of the last week have been a reminder that for all the focus on renewable energies in recent years, oil remains a mainstay of the global economy. While there will no doubt be plenty of EV owners driving past petrol stations in the coming days feeling smug at the queues beginning to form on service station forecourts, they will be unable to avoid the costs associated with higher petrol prices that will eventually flow through into freight charges, airfares, supermarket prices, trades and services charges and other transport costs. BNZ research head Stephen Toplis says a war in the Middle East and an oil shock are clearly the last thing the economy needs right now. “But those are the cards that have been dealt. So, all bets are now off. We’ll have to revise up our inflation forecasts and down our growth forecasts. So will the central bank, but what is much less clear is what it all means for monetary policy.” The events of the last week have even led some investors to compare the current market to the oil crisis that followed the 1979 Iranian revolution. “It’s a late 70s environment, when we had the second oil shock,” one experienced investor told the FT on Monday. “There is a certain irony that the secular bull market of the 80s started with Iran and in my view the secular bear market of the 2020s will also start with Iran. When this war is over, oil prices will fall as we will already be in a global recession.”