ASX 200 Pares Midday Losses as Oil Surge, Gold Slide and Tech Sell-Off Test Australian Shares on Tuesday

SYDNEY — Australian shares recovered much of their early-session slide on Tuesday afternoon, though the benchmark index remained slightly lower as rising oil prices, a stronger U.S. dollar and a broad technology sell-off weighed on sentiment.

The S&P/ASX 200 was down 13.1 points, or 0.15%, at 8,770.1 as of 2:13 p.m. Sydney time, well above its midday level. By lunchtime, the index had fallen 41.7 points, or 0.47%, to 8,741.7, while the broader All Ordinaries had dropped 46.7 points, or 0.53%, to 8,890.3.

The afternoon rebound trimmed roughly two-thirds of the index's midday losses, but the market was still handing back part of Monday's rally. The ASX 200 had closed Monday at 8,783.2, up 66.6 points, or 0.76%.

Oil and the dollar set the tone

The pullback followed a mixed overnight session on global markets, with higher oil prices and continuing uncertainty over the outlook for artificial intelligence weighing on risk appetite, Westpac economist Neha Sharma said.

"Energy markets remained the key focus," Sharma said, pointing to doubts over U.S. President Donald Trump's proposed Russia-Ukraine energy ceasefire and concerns about fuel availability that reinforced expectations of prolonged supply disruptions. She added that the U.S. dollar strengthened alongside oil, while the Australian dollar and most major currencies weakened against the greenback.

Brent crude was trading at $105.70 a barrel after climbing above $107 overnight to its highest level of October. The spike came as U.S. lawmakers from both major parties criticized Trump's Russian diesel supply deal and as fighting between Saudi forces and Houthi rebels continued.

The Australian dollar was buying 69.53 U.S. cents, down from 69.77 U.S. cents at 5 p.m. Monday.

Miners and gold stocks drag

The combination of higher oil prices and a firmer U.S. dollar hit the local resources sector, which is heavily weighted in the benchmark. The materials sector fell 1.7% by midday, with BHP, Rio Tinto and Fortescue all trading lower.

That marked a sharp reversal from Monday, when materials stocks led gains in midday trading as gold, silver and copper prices edged higher, with BHP up 3% and Rio Tinto rising more than 1% at that stage.

Gold miners also came under pressure. The precious metal slumped to $4,165 an ounce, pulling the gold sub-index down 1.7%.

Energy and consumer stocks provide support

Energy shares were among the few bright spots, benefiting directly from the oil rally. Santos, Woodside and Ampol each rose more than 1.4%, while coal producers were mixed. Uranium stocks sold off after enthusiasm around artificial intelligence, a key driver of demand expectations for nuclear power, faded overnight.

Consumer-facing stocks bounced back after a soft start to the week. Consumer staples gained 0.8% and consumer discretionary shares rose 0.4%.

Financials edged higher, helped by modest gains in the big four banks and major insurers, though Macquarie and most other financial services companies slipped. The banking sector's steadiness was important for the broader market, given its heavy weighting in the index. Financial shares had surged 1.56% on Monday, leading the market higher.

Tech worst performer

Technology was the weakest sector by lunchtime, sliding 2.4% in a broad sell-off that followed the Nasdaq's overnight decline. The losses reflected a wider reassessment of the artificial intelligence trade that has buffeted global technology stocks in recent sessions.

The sell-off was a reversal from Monday, when the local technology index rose 0.85%.

Telstra under pressure at AGM

Among individual stocks, Telstra shares fell 0.7% to 4.62 Australian dollars as management faced shareholders at the company's annual general meeting. Chief Executive Vicki Brady offered a fresh apology for the nationwide outage in July.

The stock has fallen almost 5% in less than three sessions. Telstra shares had already slid 3% in midday trading Monday, extending losses from Friday.

The July outage, caused by a critical software fault, halted train lines and disrupted business transactions. It was the third major national outage in less than a year for the company, which supports about 25 million Australian mobile services. At the time, Brady said the company had "let our customers and Australians down."

Telstra faces potential civil penalties under powers the government introduced after the 2025 Optus outage.

RBA keeps hike option open

Investors also weighed the Reserve Bank of Australia's September meeting minutes, released Tuesday. The minutes said Australia's inflation outlook would continue to be affected by developments in the Middle East and did not rule out further increases in the cash rate.

The board said it would remain focused on its mandate of price stability and full employment and would do what it considered necessary to achieve that, including raising the cash rate target further if required.

The prospect of additional tightening has hung over the market in recent weeks, as elevated energy costs feed into inflation expectations. Higher interest rates typically weigh on equity valuations, particularly for growth-oriented sectors such as technology.

Index below recent highs

Tuesday's level leaves the benchmark about 5.7% below its 52-week high of 9,296.7. The index's 52-week low of 8,262.4 was set on March 23.

The market has been choppy in recent weeks as investors balance strong commodity prices against concerns about inflation, interest rates and the impact of the Middle East conflict on global growth.

On Monday, buy now, pay later provider Zip topped the ASX 200 leaderboard, closing 5.56% higher at 2.28 Australian dollars, ahead of its first-quarter trading update scheduled for Oct. 23.

What's ahead

Market watchers will be looking to overnight trading on Wall Street, movements in crude oil and gold, and any further developments in the Middle East for direction heading into Wednesday's session.

Investors will also be monitoring commodity prices closely, given the heavy influence of miners on the benchmark index, as well as further signals from the Reserve Bank on the path of interest rates.

The Australian sharemarket closes at 4 p.m. Sydney time.