ASX 200 and NIKKEI Slide as Middle East Tensions Trigger Risk-Off Markets

Australia’s sharemarket took a clear risk-off hit on Tuesday as the escalation in the Middle East and fresh comments from the Reserve Bank’s top boss hit sentiment. The ASX 200 dropped to 8,950, while the All Ordinaries dropped to 9,110. The Australian dollar also devalued to 0.6950 against US dollar which signalled increasing demand for the greenback as investors de-risked their portfolios.

Energy Shock Fears Drive ASX and NIKKEI Losses

Mining contributed to the ASX losses. Investors wondered what would happen to energy security of China after the Iran conflict cut off a key oil supply route to the world’s second-largest economy.

That macro fear translated to direct pressure on the large miners. Weaker demand expectations and higher input risks can squeeze margins and lead to lower growth expectations. BHP dropped to $55.45, Rio Tinto dropped to $161, and Fortescue dropped to $19.

Gold miners also reversed Monday’s strength as risk positioning shifted and profit taking returned. Northern Star Resources is down to $28.50 and Evolution Mining is lower to $15.80.

Asian markets extended the risk-off move with investors pricing in the risk of tighter energy conditions and broader regional disruption. Japan’s Nikkei 225 fell to 53,591, as traders were concerned about Japan’s heavy reliance on oil and LNG shipments through the Strait of Hormuz.

Japan’s energy buffer put the immediate worst-case fear to rest. But it did not eliminate the need for the market to reprice risk. Japan has stockpile of over 200 days of energy that reduces the near-term supply shock even if shipping condition is worse.

However, equity markets responded swiftly because the Strait of Hormuz is an important chokepoint. Traders often price in threats of shortages before shortages appear in data.

ASX 200 Technical Outlook: Pullback After Record High

The daily chart for ASX 200 shows a strong drop after reaching a record high at 9200. This drop has broken the initial support at 9080, and now the index is moving towards the 8,900 level, which is the 50-day SMA. A break below 8,90 is likely and will take the index towards 8,750, which is the 200-day SMA support.

Overall, the index shows a strong bullish trend, and if the support of 8,500 holds, the next move in index will likely be higher. A break above 9,200 will indicate that the correction is over. However, the ongoing global risk may break the support of 8,500 and take the index into a deeper decline.

The short-term price action for the ASX 200 shows an ascending channel pattern, whereby the index is dropping after hitting resistance of 9,200. A confirmed break below $8950 will break the channel pattern and introduce a deeper correction towards 8,750. The RSI is also correcting from overbought levels which indicates the normalization in the trend.

Nikkei Technical View: Can Support at 53,500 Maintain?

The short-term price action for the NIKKEI index shows a correction from the resistance of an ascending channel pattern. This channel was formed from the April 2025 lows. The index has hit strong resistance at the ascending channel pattern at 60,000 and initiated a strong correction towards the support of the channel.

This support also aligns with the ascending trend line, which is highlighted in red. As long as 53,500 holds, the short-term trend remains bullish. A break below $53500 will take the index to $50,000.

The ascending channel pattern for NIKKEI is also evident on the 4-hour chart. The chart shows clearly that the index broke the red trend line and hit the strong support at the 53,500 level. However, after hitting this level, the index has initiated a strong rebound, whereby it is now looking for the next direction.

As the index hit support, the RSI also reached an oversold level and initiated a rebound. A break below 53,500 will drop the index to $50,000.

Bottom Line

Markets are still sensitive to geopolitical headlines and energy supply risks. The steep decline in the ASX 200 and the retracement in the NIKKEI reflect short term uncertainty rather than a structural change in trend. Rising oil prices and disturbances around the Strait of Hormuz keep global equities under pressure and risk off.

However, both indices still have important technical supports that keep the overall bullish structure intact. If the ASX 200 supports above 8,500 and the NIKKEI supports the 50,000 range, the current move could be a correction of a larger uptrend. A stabilization of geopolitical tensions could lead to a quick return of risk appetite and both markets could resume their upward movement. However, a break below these levels will introduce deeper correction.