Oil Price Surge Sends Australian Shares Plummeting to Three-Month Low

Australian shares plummeted to a three-month low on Thursday as the sharp rise in oil prices sparked fresh concerns about persistent inflation, which could lead to continued tight monetary policy. The S&P/ASX 200 index declined by 1.2% to 8,658.10, marking its lowest level since June 12. Oil prices surged nearly 4% overnight due to escalating tensions between Iran and the US, fueling worries about higher fuel costs in Australia.

The Reserve Bank of Australia has already increased its cash rate by 75 basis points this year and warned that further hikes may be necessary to contain inflation. Market participants will closely monitor the upcoming employment data, which could influence the central bank's decision at next week's policy meeting. Meanwhile, yields on government bonds rose, weighing on equities as investors sought safer assets.