ASX Edges Higher as Energy Leads While Markets Watch Iran’s Next Move

Key Highlights:

• ASX 200 inches up 0.04% to 8,537.8 amid global uncertainty
• Energy sector rises over 1% as oil holds above $US103 per barrel
• Wall Street gains on hopes of Middle East de-escalation
• Gold and tech stocks lag as risk sentiment improves
• Defence stocks surge, led by DroneShield up nearly 10%
  
   

The Australian share market is trading slightly higher on Thursday, holding modest gains as investors weigh a delicate mix of geopolitics and commodity strength.

The benchmark S&P/ASX 200 is up just 3.5 points to 8,537.8 at midday, reflecting a market that is cautious rather than convinced.

Overnight, major US benchmarks closed higher on growing hopes of a ceasefire in the Middle East. Yet, optimism remains tentative, with Iran still reviewing a US-led 15-point peace proposal.

ASX Sector Snapshot | Source: MarketIndex 

A market balancing war risks and oil strength

At the centre of today’s trade is oil.

Brent crude is holding above $US103 a barrel, up 1.1%, while WTI crude is also higher. That strength is lifting energy stocks locally, making the sector the day’s standout performer, up 1.07%.

Commodities Price Data | Source: MarketIndex 

This dynamic is not new. Historically, periods of geopolitical tension in the Middle East have pushed oil prices higher, often acting as a buffer for resource-heavy markets like Australia.

In this case, the ASX is benefiting from what could be described as a “conflict premium.”

But the rally is fragile.

While the US has signalled progress on a ceasefire framework, Iranian officials have reportedly pushed back on key terms, describing them as excessive. That uncertainty is keeping markets on edge.

Wall Street optimism meets global caution

Overnight gains in the US offered some support:

• S&P 500 rose 0.54%
• Dow Jones Industrial Average gained 0.66%
• NASDAQ Composite climbed 0.77%
  
   

The rally was driven by hopes that tensions in the Middle East may ease.

However, markets remain highly sensitive to headlines. Any confirmation or rejection from Tehran could quickly reverse sentiment.

As one market strategist at BMO Private Wealth, Carol Schleif, recently noted in similar conditions:

“Stocks are trying to find their footing as investors are keeping one eye on headlines and the other on risk.”

That observation feels particularly relevant today.

Sector split tells the real story

Beneath the surface, the ASX is showing clear divergence.

The leaders: energy and defensive

• Energy stocks lead the market, supported by oil strength 
• Financials and healthcare post modest gains 
• Utilities and industrials also edge higher
  
   

The laggards: growth and safety trades unwind

• Information Technology drops 1.24%
• Real Estate falls sharply by 2.06% 
• Materials and gold stocks retreat
  
   

The decline in gold, down around 2% on the ASX gold index, highlights a shift away from traditional safe havens as traders tentatively price in de-escalation.

Stock movers: defence stocks surge

The day’s biggest moves are being driven by global themes rather than company-specific news.

• DroneShield Ltd (ASX: DRO) jumps 9.86% to $4.68
• Electro Optic Systems Holdings Ltd (ASX: EOS) rises 5.76% 
• Austal Ltd (ASX: ASB) gains 4.69%
  
   

These stocks are benefiting from a broader global trend. Defence spending tends to rise during periods of geopolitical tension, and markets are quick to price that in.

Elsewhere, retail surprised on the upside:

• Myer Holdings Ltd (ASX: MYR) climbs 8.62%
  
   

This suggests some investors are starting to look beyond cost-of-living pressures and into a potential recovery narrative.

The domestic story: wealth rises, but so does debt

While global headlines dominate, local data is quietly shaping the backdrop.

New figures from the Australian Bureau of Statistics show:

• Household wealth rose 2.5% or $453.7 billion in the December quarter
• Residential property values increased 3.2% 
• Household debt also grew by 2% or $64.2 billion
  
   

This paints a familiar picture.

Australians are getting wealthier on paper, largely due to rising property prices, but that wealth is increasingly leveraged.

Historically, this kind of dynamic supports consumption in the short term but can create vulnerability if interest rates remain elevated.

A headline-driven market

What stands out today is not the size of the market move, but the nature of it.

The ASX is not reacting to earnings, economic data, or policy changes. It is reacting to headlines.

The proposed US peace framework has become the single most important variable in global markets right now.

If tensions ease, oil could fall, dragging energy stocks lower but lifting broader risk sentiment.

If talks break down, the opposite may happen.

Energy stocks are doing the heavy lifting, supported by elevated oil prices. Meanwhile, technology and property stocks are under pressure, reflecting uncertainty about the global outlook.

For now, the market is waiting.

The next move is unlikely to come from earnings or data. It will come from geopolitics.