ASX 200 News Today: Oil Surge and Middle East Tensions Trigger Broad Market Sell-Off

The ASX 200 came under pressure when oil prices rose sharply following the closure of the Strait of Hormuz and tensions in the Middle East. The aftermath of the jump in energy prices raised new fears about inflation and a slowdown in global growth. Investors went into risk-off mode.

This change put pressure on Australian equities and caused widespread selling throughout the market. Higher oil prices also added to cost pressures and eroded earnings expectations which drove the index lower.

ASX 200 Sectors Slide as Materials and Gold Lead Losses While Energy Gains

The ASX 200 dropped after the brief recovery earlier in the week. The index opened lower and remained under pressure for the entire session on Thursday. During the close, the index was down 1.65% to 8,497.8 points.

Weak sentiment from Wall Street added to the pressure. The Dow Jones 30 and  Nasdaq also remain negative within the bearish trend due to ongoing economic uncertainty from the Middle East. This negative trend set the tone for Australian markets and kept buyers on the sidelines.

The selling was broad and aggressive in most sectors. Gold stocks were hit the hardest, with the All Ordinaries Gold Index falling 9.23%. Mining stocks also lost out badly with the Materials Index falling by 4.83%. The chart below shows that the Materials Index has broken an important support level of 21,300 which indicates a sharp drop. This sharp drop in the materials sector will likely take the ASX 200 lower.

Consumer discretionary and financial stocks also dropped. However, energy stocks rose 5.08% due to a massive surge in oil prices. From a technical perspective, the Energy Index has formed bullish price action as discussed in the previous article. The Energy Index will likely gain further in the near term as energy stocks benefit from the higher oil prices.

ASX 200 Technical Analysis: Bearish Pressure Builds as Key Support Nears

From a technical perspective, the ASX 200 shows strong bearish pressure as the price failed to recover above 8,700. The failure to recover above 8,700 and then a strong drop towards 8,400 indicate that the index is set to break lower. A break below 8,400 will activate a strong drop in the ASX 200 towards 7,800.

Moreover, this scenario is further confirmed by the strong bearish developments in the Materials Index, which looks to break the ascending broadening wedge pattern. The chart also shows that the 20-day SMA is crossing below the 50-day SMA, which indicates a negative trend in the short term.

The bearish trend is further confirmed on the hourly chart, as the price remains below the 50- and 200-SMA.

Bottom Line

The ASX 200 remains under pressure with rising oil prices and geopolitical tensions that continue to drive uncertainty. The market has turned to risk off mode, and broad sell is a sign of weaker sentiment across sectors. The price action for ASX 200 is also bearish in the short term as index failed to break above 8,700. The index is approaching the 8,400, which is likely to break soon. A break below 8,400 will indicate deeper correction to 7,800. However, strength in energy stocks shows that some sectors benefit from geopolitical tensions, which may limit deeper losses.