Worries about the durability of the Middle East ceasefire look set to undermine Australian shares, which should start trading lower on Thursday.
The expected 0.2% decline in the ASX 200 index is in contrast to the strong performance of stocks in New York overnight, which were buoyed by news of the two-week ceasefire agreement between the United States and Iran.
The slight anticipated drop at 10 am AEST (12 pm GMT Wednesday) was indicated by the benchmark’s June share price contract being quoted 22 points under the previous settlement at 8,967 points at the time of writing.
Morgans Financial private client adviser Lachlan Walsh said it would be “touch and go” if the 10-point plan set out by Iran for more enduring peace was implemented.
“It will be interesting to see if it goes through,” he said.
All three major U.S. stock indexes soared in a ‘relief rally’ inspired by a deal organised by Pakistan that resulted in a two-week suspension of the five-week war that had sent oil prices soaring and equity markets diving.
A senior Iranian official told Reuters that the crucial Strait of Hormuz, through which 20% of the world's oil is shipped, could be reopened on Thursday or Friday ahead of peace talks if the countries agreed upon a framework for the ceasefire.
"It’s an expected move today and there's still a lot of work to do, but I think the market is quite relieved," Horizon Investments head of portfolio management Mike Dickson said in a Reuters story.
"The other side of this coin could have been a lot worse and frankly there's a good reason to think that it was possible too. So you're seeing that relief rally in the hardest-hit areas of the market."
The Dow Jones Industrial Average soared 2.9% in its biggest rise since April 2025, the S&P 500 was not far behind with a 2.5% advance, and the Nasdaq Composite jumped 2.8% on Wednesday (Thursday AEST).
The Australian market had recorded its strongest day in a year on Wednesday with the ASX 200 rocketing 2.6% to 8,951.8 points as eight of the 11 sectors finished higher on news of the pause in hostilities.
“We had a cracker of a day yesterday and were up almost 3% at one stage,” said Walsh.
In fixed interest markets, yields on Australian Government bonds fell, with two-year rates down 0.45% to 4.641% and 10 year rates dipping 0.08% to 4.933% at the time of writing.
