Australian shares pared most of their earlier losses to close marginally lower on Tuesday after a widely expected rate hike from the central bank, with sticky inflation and an oil-driven price surge keeping investors on edge.
The S&P/ASX 200 index closed 0.2% lower at 8,680.50, extending losses from Monday. The benchmark fell as much as 0.9% earlier in the session. The Reserve Bank of Australia raised its cash rate by 25 basis points to 4.35%, factoring in two adverse scenarios in which the Strait of Hormuz remains closed, delaying the resumption of shipping flows until early 2027. The central bank also downgraded its outlook for economic growth, marking a third rate hike this year and reversing all of the easing it delivered in 2025.
“Markets are pricing in a longer Iran conflict, with high energy costs keeping inflation elevated and raising the risk of broader RBA tightening, rather than a one-off hike,” said Cliff Man, CEO at ETF Shares.
The RBA warned that inflation could remain sticky, citing the global oil shock stemming from the Iran conflict.
However, Prashant Newnaha, senior rates strategist at TD Securities, said there was little to suggest the central bank was poised to move again at its next meeting or with any urgency thereafter.
Financials fell 0.5% on the day, weighed by a near 2% drop in Westpac. The country’s second-largest home lender reported a weaker-than-expected first-half profit and warned that mortgage and business customers are facing pressure from higher energy and fuel costs linked to the U.S.-Iran conflict.
Mining stocks followed and slumped 0.5%, with majors BHP, Rio Tinto down 0.4% and 0.3%, respectively. Gold stocks lost 0.8%, with shares of Regis Resources slipping 5.9% after a merger deal with Vault Minerals .
Bucking the trend, energy and technology stocks added 0.9% and 0.8%, each.
In New Zealand, the benchmark S&P/NZX 50 index closed 0.8% lower at 12,996.20.
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