Energy Sector Powers ASX Gains Amid Rising Geopolitical Risks
Australian shares edged higher on Monday as energy stocks surged on the back of rising oil prices, spurred by intensifying Middle East tensions and a landmark $18.7 billion takeover bid for Santos Ltd. The S&P/ASX 200 index rose 0.2% to 8,564.7 in early trade, building on last week’s 0.6% gain.
The upward momentum was driven largely by fears of supply disruptions in the oil-rich Middle East, as Israel and Iran exchanged fresh strikes, heightening concerns of a broader conflict that could unsettle global energy markets.
Santos Jumps 12.1% on Blockbuster Takeover Bid
Oil and gas giant Santos Ltd led the rally, soaring 12.1% to its highest level since August 1, after it confirmed receiving a $18.7 billion takeover offer from a consortium spearheaded by Abu Dhabi National Oil Company (ADNOC). The bid underscores the attractiveness of Australian energy assets amid global energy security concerns and sustained oil price volatility.
If finalized, this acquisition would mark one of the largest M&A deals in the Asia-Pacific energy sector in recent years, positioning Santos as a critical player in ADNOC’s international expansion strategy.
Energy Stocks See Best Day in Nearly Five Years
The energy sub-index jumped 6.1%, marking its best performance in nearly five years and its highest level since October 2023. This rally also extended the sector’s winning streak to six consecutive sessions, underlining investor confidence in the sector’s near-term profitability.
Brent crude prices have rebounded sharply, crossing $85 per barrel, as markets priced in the risk of escalating conflict and possible oil supply chokepoints through the Strait of Hormuz.
Broader Market Mixed: ASX Faces Regulatory Scrutiny
While energy stocks buoyed the broader index, the rally was offset by weakness in tech, financials, and consumer staples:
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ASX Ltd, the bourse operator, plunged 5.2% after Australia’s securities regulator launched a probe into its risk management practices, raising concerns about market integrity.
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Financials lost 0.2%, with the “Big Four” banks declining between 0.1% and 0.7%.
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Information technology and consumer staples dropped 0.4% and 0.5%, respectively, as risk-averse investors rotated into cyclicals.
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Real estate (+0.2%) and healthcare (+0.6%) posted moderate gains, offering some balance to sectoral performance.
Mining Stocks Resilient Despite Iron Ore Dip
Mining stocks rose 0.4%, bucking weakness in iron ore futures as heavyweights BHP and Rio Tinto gained 0.9% and 1.1%, respectively. The resilience reflects optimism around China’s infrastructure-led demand and export-driven profitability in the metals sector.
New Zealand Market Flat
Across the Tasman Sea, New Zealand’s S&P/NZX 50 index remained largely unchanged at 12,576.92, reflecting a more cautious investor tone amid global uncertainty and muted domestic catalysts.
Outlook: Volatility and Opportunity Coexist
With geopolitical uncertainty rising and central banks around the world entering a data-dependent policy phase, markets are expected to remain volatile in the coming weeks. The energy sector may continue to lead if oil prices remain elevated, but regulatory actions, M&A developments, and inflation data will be key drivers.
The Santos-ADNOC deal, if finalized, could also trigger a re-rating of other undervalued Australian energy assets, drawing fresh global capital into the sector.
