Culture
Opinion
Geopolitical tensions rarely stay confined within their borders and the June 2025 escalation between Iran and Israel is no exception. Within hours of the first strikes, global markets responded sharply, prompting a reassessment of risks across asset classes.
For Australia, the aftermath extends beyond oil prices, influencing interest rate forecasts, consumer spending, equities and the broader investment landscape for the remainder of the year. For business students, these developments offer more than just headlines, they represent how global events impact financial systems, shaping the very environment we are preparing to enter.
Understanding how a single geopolitical event can ripple through commodity markets, bond yields, and investor sentiment provides a clear view into the global interconnectedness that defines today’s business landscape. Whether you’re pursuing a career in investment banking, consulting, public policy or beyond, the ability to interpret and respond to external events will always be essential.
While the broader consequences will take time to become clear, the immediate winners and losers are emerging. From surging gold prices to renewed inflation concerns, this conflict isn’t just geopolitical, it’s economic and its reach is global.
Winners
Gold Investors
In times of geopolitical turmoil, gold’s role as a safe haven asset has been solidified. From its all-time high in April 2025 during tariff tensions, it once again surged to over $3400 per ounce following Israel’s military strikes on Iran. As markets become more volatile and investor sentiment decreases, many turn to gold, driving the commodity’s price upwards.
Australian gold mining companies, like Northern Star Resources and Evolution Mining, saw their stock prices rise by 4.9% and 5.3%, respectively, as local investors shifted into safer investments. In addition, central banks, especially those in emerging markets worried about the US Dollar, have been stocking up on gold reserves. A survey conducted by Reuters shows 95% of respondents predict Central bank gold purchases will continue to rise, a trend that may continue if geopolitical tensions persist.
Energy Producers
Few regions are as important to global oil supply as the Strait of Hormuz, where over 20% of the world’s oil flows through daily. As the conflict unfolded, Brent crude spiked intraday by 7%, briefly reaching over $74 before stabilising.
For Australian energy producers, this geopolitical tailwind was a blessing. The energy sector saw a 4.8% increase, with Woodside Energy shares increasing by over 7% the following day. With over 70% of Australia’s LNG exports heading to Asia, higher global prices may improve trade balances in Q3. If current spot prices hold, LNG export earnings could reach $70bn AUD in 2025, surpassing earlier forecasts of $64bn.
Australian Government Bonds
Geopolitical tensions often trigger a flight-to-safety, as seen with the turn to the aforementioned commodities such as gold. Australian government bonds, which hold a AAA rating, have become a popular choice. The 10-year bond yield dropped to 4.18%, reflecting strong demand from institutional investors looking for safety during global uncertainty.
Australian bonds are also becoming more attractive globally, offering a positive yield advantage over US treasuries when adjusted for inflation. As a result, more superannuation funds and insurance companies are shifting towards fixed-income investments, partly due to the geopolitical risks.
Losers
Australian Motorists and Households
If there’s one group that feels the effects of global conflicts almost immediately, it is drivers. The average unleaded petrol price in Sydney spiked by 11c to 200.3c per litre the Monday following the strikes.
Source: NRMA
However, even modest increases in fuel prices can have a formidable effect on the economy. Higher petrol costs reduce disposable income, especially for lower and middle-income households, and can lead to cutbacks in discretionary spending. The ABS highlights automotive fuel as one of the most volatile components of the Consumer Price Index, meaning increases in pump prices can feed directly into inflation readings.
This development comes amid a slight improvement in household sentiment, with the Westpac–Melbourne Institute Index of Consumer Sentiment rising by 0.5% to 92.6 in June 2025. However, the index remains below the neutral threshold, reflecting ongoing consumer concerns about personal finances and the broader economic outlook.
RBA Rate Cut Timeline
The Reserve Bank of Australia (RBA) is trying to balance controlling inflation while supporting economic growth, especially with the added uncertainty from the conflict. With GDP growth already low at just 0.2% in Q1 2025, there’s a higher risk to consumer spending and inflation. However, most economists believe the RBA won’t immediately react to a short-term increase in petrol prices, with some even suggesting the conflict won’t impact monetary policy at all.
The RBA has already cut interest rates twice recently, including a 25 basis point reduction to 3.85% this month, and inflation is expected to gradually decrease. Although there were earlier expectations for another rate cut in August or September, economists at NAB and ANZ now predict this could be delayed until late 2025 or early 2026, depending on how persistent core inflation is. This delay in lowering interest rates could impact mortgage borrowers and businesses, potentially reducing consumer confidence and slowing economic growth even more.
Australian Equities Outside Resources
Beyond the energy and gold sectors, the broader ASX 200 took a hit, falling 0.4% in the two days following the airstrikes. Technology and property sectors were the worst performers, down 2.4% and 1.8% respectively. This decline was driven by concerns over supply chain disruptions and rising interest rates, with potential for economic slowdown as investors heightened risk aversion.
The travel and leisure sectors also suffered as Qantas and Flight Centre both declined over 4% amid anticipated jet fuel price increases and falling consumer demand. Real estate investment trusts also faced selling pressure amid a renewed speculation of rate increases. Some defensive sectors like supermarkets and healthcare fared better, with Woolworths and CSL recording modest gains. However, the general domestic market reflected investor unease.
Global Equity Markets
The financial repercussions of the ongoing conflict are being felt worldwide. On June 13, 2025, the Dow Jones Industrial Average experienced a significant decline of 769.83 points (1.79%), settling at 42,197.79, while both the S&P 500 and Nasdaq saw losses of 1.13% and 1.30%, respectively. The VIX index, a key barometer of market volatility, spiked by nearly 17%, reflecting heightened investor anxiety. Although the index briefly stabilised, it surged again as market uncertainty deepened.
Asian markets followed suit, with Japan’s Nikkei 225 falling by 462.12 points (1.21%) to 37,710.97. This downturn was largely driven by escalating concerns over the potential for prolonged conflict, raising fears about disruptions to global supply chains and energy markets.
Sectors heavily reliant on stable global trade and affordable energy such as automotive, semiconductors, and heavy manufacturing were the hardest hit. Companies like Toyota and Samsung, whose business depend on uninterrupted shipping and affordable energy, saw their share prices sink due to the conflict.
Despite the immediate turbulence, Deutsche Bank maintains an optimistic view, asserting that markets remain undervalued and that a quick recovery is likely, even in the face of worst-case scenarios such as a potential closure of the Strait of Hormuz. Their analysis suggests that underlying market resilience will facilitate a rapid rebound once the geopolitical tensions subside.
Conclusion
The Iran-Israel conflict serves as a stark reminder that geopolitical unrest doesn’t just affect those directly involved; it reshapes markets, monetary policy, and economics across the globe. While gold and energy producers in Australia emerge as short-term winners, the broader economic landscape reveals deeper vulnerabilities: rising inflationary pressures, shaken consumer confidence, and delayed monetary easing that could weigh on recovery momentum. Such wider impacts reveal the fragility of our economic system, and why it should matter to us as future professionals.
Whether you’re studying finance, economics or interested in expanding your portfolio, this conflict is a clear reminder of how deeply interconnected markets are, and the importance of understanding the bigger picture. You may be pitching a case competition, starting an internship or graduate role, or even investing your first dollar, yet, geopolitics remain relevant. In a world that is increasingly complex and interconnected, staying informed is not just about following the news – it is about understanding how global events shape opportunities, risk, and the future of business itself.