ASX Small Caps Lunch Wrap: Geopolitical turmoil still suppressing markets… buy the dip?

Aussie shares tumbled at the start of trade and are down by 0.9% at noon as the escalating conflict in the Middle East weighs on the market.

Concerns are rising that Israel might target Iranian oil assets in retaliation, leading to losses across the index.

Oil stocks are seeing gains as crude prices jumped by 5%. This follows President Biden’s suggestion that the US might consider a strike on Iranian oil assets in response to a recent missile attack on Israel.

“First of all, we don’t ‘allow’ Israel, we advise Israel. And there is nothing going to happen today,” Biden said.

Experts say a major attack on Iran’s oil facilities could reduce supply by 1.5 million barrels per day, while smaller strikes could take out between 300,000 and 450,000 barrels.

Separately, Woodside (ASX:WDS) reported a fatal incident at its Beaumont Clean Ammonia facility in Texas. Its shares, however, rose 2% on the back of oil sentiment.

But gains in energy stocks were offset by losses in iron ore stocks today as iron ore futures in Singapore retreated by 1%. BHP (ASX:BHP), Rio Tinto (ASX:RIO) and Fortescue (ASX:FMG) were all down by over 2%.

Still in the large caps space, ANZ Bank (ASX:ANZ) fell 1% after OnePath Custodians (OPC), along with Zurich Australia and ANZ reached a $50 million settlement in a class action lawsuit with certain OPC members. The lawsuit claimed these members didn’t receive fair interest rates on their investments before January 2020.

Elsewhere, fund manager Regal Partners (ASX:RPL) has agreed to allow Platinum Asset Management (ASX:PTM) to peek into its books, enabling Platinum to potentially make a better acquisition offer. While Regal initially rejected Platinum’s proposal, this due diligence could result in a more attractive offer price.

NOT THE ASX

Overnight, Wall Street fell across the board, with the S&P500 down by 0.17%, the blue chips Dow Jones by 0.44% and the tech heavy Nasdaq by 0.04%.

President Biden spooked markets when he suggested the US might be considering a potential strike on Iranian oil assets in response to a recent missile attack on Israel.

Crude prices jumped by another 5% on his comments, bringing this week’s total rise to 9%, and energy stocks on Wall Street outperformed the broader market.

Wall Street’s VIX index, sometimes called the fear index, jumped 8%.

“The VIX is signalling that we are still in the midst of the ‘iffy October’ period, but we ultimately expect investors to buy this dip,” said Fundstrat’s Thomas Lee.

But with limited market-moving data, all eyes are now on Friday’s US payrolls report, which will influence the Fed Reserve’s next decision on interest rates.

“We continue to expect more aggressive easing as the Fed confronts a rapidly softening labour market,” said Andrew Hollenhors at Citigroup.

To stocks, Nvidia rose by 3.37% on no specific news, taking its market cap back above the US$3 trillion mark.

Tesla shares keep falling, down by another 3.4% last night, after reporting disappointing delivery numbers on Wednesday.

Most retailers, like Walmart, Amazon and Target were sold off as the the US East and Gulf coast ports strike hits day three.

AND … the ongoing chaos caused by the US dockworkers strike could cost the US economy up to US$4.5 billion daily, say experts.

An update to this plotline, though: US port workers and operators have reportedly in the past few hours, according to Reuters, tentatively agreed to reach a deal to end the strike.