ASX 200 Slumps Amid Oil Price Surge, Rate Hike Fears

The Australian stock market, as represented by the ASX 200 index, saw its worst week in six months with a decline of 2.9%.

This downturn was driven by rising oil prices due to the Middle East escalation, increasing global bond yields, and renewed expectations that both the Reserve Bank of Australia (RBA) and the US Federal Reserve (Fed) will hike interest rates this month.

The index is now at a nine-week low, putting an end to its five-month winning streak despite being only halfway through September. The ASX 200 has also fallen 1.6% year-to-date, raising concerns that it may be forming a grinding top, as tops are often described as 'a process' rather than a single event.

Correlations between sectors and the index have surged to over 0.8, indicating that macro forces are dominating stock- and sector-specific drivers, typical of a broad risk-off move.