Middle East conflict spikes oil and metal market

Energy boost

Oil prices have surged amid the conflict as shipping flows through the vital Strait of Hormuz have ground to a halt.

Brent crude oil initially spiked as much as 12% to over US$80 a barrel when markets in Asia opened on Monday following the initial United States (US)–Israeli airstrikes on Iran. 

President Trump has indicated he doesn’t expect the fighting to last more than a few weeks; however, analysts say if the conflict is prolonged, Brent crude could soar to US$100 a barrel.

Brent crude oil daily chart

Reserve Bank of Australia (RBA) Governor Michele Bullock has indicated that implications for Australia are mixed given the country is a net energy exporter.

Energy stocks listed on the Australia Securities Exchange (ASX) have spiked with the surge in oil prices.

Woodside Energy and Santos  both surged in the aftermath of the attacks.

Woodside Energy (ASX:WDS)

Woodside shares are up around 20% over the past 12 months.

Woodside Energy daily candlestick chart

ASX technical data show shares in a strong bullish trend, confirmed by multiple indicators – specifically, the 5-day moving average (MA) above the 20-day and 50-day MAs. A longer-term bullish signal is also implied by the 200-day MA, which is also trending higher.

Woodside Energy historical trends and price targets

However, brokers believe much of the upside is already factored in, with the average recommendation being a 'hold' according to Refinitiv, with a target price of $27.39, suggesting Woodside could fall 10% from current levels.

Morgans favours Woodside, along with Amplitude Energy, noting their operational and strategic investment case has not changed. 

Overall, analysts apply an oil shock premium of 10% to their 12-month target prices for Woodside, Santos, and Karoon Energy.

Morgans has increased its target price for Woodside Energy to $33.55 from $3.50, but lowered its rating to 'accumulate' from 'buy'. Morningstar is also upbeat. However, UBS thinks the stock could fall almost 21% from current levels, with the ongoing search for a chief executive officer (CEO) weighing on uncertainty.

Woodside Energy buy/sell indicators and analyst projections

Safe-haven status

Escalating geopolitical concerns have also driven precious metals higher. Bullion is inching closer to the all-time highs reached in January.

A renewed pullback from bonds and currencies – the so-called debasement trade – has injected fresh momentum into what has already been a multi-year surge. The precious metal climbed to a record above $5595 an ounce in late January.

Spot gold daily chart

The gold miners sub-index hit an all-time high immediately following the attacks, with Evolution Mining and Northern Star rising more than 5%. sloping 200-day MA.

Northern Star Resources (ASX:NST)

Shares in Northern Star have risen more than 75% over the past 12 months.

Northern Star daily candlestick chart

The stock appears to be in a long-term uptrend confirmed by multiple indicators, specifically the upward-sloping 200-day MA.

Northern Star historical trends and price targets

Brokers are optimistic about the stock's outlook, with the average target price surveyed by Refinitiv at $31.51, around 3% higher than current levels. Bell Potter is most bullish with a $35 price target, while UBS is an outlier, suggesting investors sell the stock at current prices, following disappointment with the producer’s first half (H1) results.

Northern Star buy/sell indicators and analyst projections

Travel turmoil

A combined US$22.6 billion was wiped from global airline stocks immediately after the weekend airstrikes. Airline analysts have warned of weeks of travel disruption amid the airstrikes, with key Middle Eastern hubs facing closures and significant delays.

Global airline stocks chart

Qantas (ASX:QAN)

Qantas shares have dived following the attacks, as CEO Vanessa Hudson indicated that the spike in oil prices will significantly impact the aviation industry, while also noting that the airline has ‘pretty good’ hedging in place.

Qantas daily candlestick chart

Despite the recent turbulence, analysts are bullish on Qantas, and technical data show shares in a near-term uptrend, with the rising 20-day MA implying opportunity for profit. 

The average broker price target of $12.26 suggests 36% upside. Macquarie has an 'outperform' rating on the stock, continuing to support earnings growth from Qantas’s fleet renewal, cost discipline, and Jetstar momentum, which it forecasts will offset softer international conditions.

Qantas historical trends and price targets