ASX 200 Hits Correction, Bonds Spike, The Oil Shock Is Spreading

This Isn’t Just Geopolitics Anymore, It’s Now a Macro Selloff

The ASX 200 has now officially entered correction territory.

What stood out just as much was the move in bonds. The 10-year Treasury yield rose 13 basis points in a single session, which is a large one-day move. That is not a gradual repricing. It suggests the bond market is starting to treat what first looked like a short-term geopolitical flare-up as a more persistent inflation risk.

That matters because the market is still carrying fairly optimistic earnings expectations, with consensus forecasting 18% global earnings growth in 2026. Even a modest rise in discount rates can compress valuations quickly, and that is before factoring in the impact of higher input costs on margins.

What are the Best ASX Stocks to invest in right now?

Check our buy/sell tips

What’s happening to the ASX200

The ASX 200 is now down 10% from its 2 March peak. Australian equities are clearly under pressure, and part of that dynamic likely comes back to China. China is Iran’s biggest oil customer, so any prolonged disruption through the Strait of Hormuz also puts added strain on China’s economy, which then feeds back into sentiment across the region. Given that China is a long-standing trading customer of ours.

Trump’s final escalation plan

Trump has now escalated the rhetoric again, saying the US will obliterate Iran’s power plants if the Strait of Hormuz is not reopened within 48 hours. For us, that only adds to the concern because any further damage to infrastructure is very unlikely to help bring oil prices down in the near term.

That is why energy continues to stand out as the likely outperformer. Santos and Woodside remain well-positioned after Brent crude rose 3.25% to US$112.19 and WTI gained 2.8% to US$98.23 on Friday night. Since the Iran war began, energy shares have risen 16.21% while the ASX 200 has fallen 8.37%.

The investor’s takeaway

The key point is that this is no longer just a geopolitical headline story. It is now feeding through to bond yields, inflation expectations, equity multiples, and sector rotation all at once. In that kind of environment, we think it makes sense to build some cash and hold dry powder, because there are very few places to hide and sharp selloffs can create real opportunities.

Markets are only now starting to price risk back in after an extraordinary bull run. When we look at the past, four of the last five oil shocks have ended in recession. That does not guarantee the same outcome this time, but it does tell us the risk is real.

For us, the best approach is to prepare for more volatility ahead while staying prudent and consistent.