Last week was a pretty special week for the history of the S&P/ASX 200 Index (ASX: XJO). Over the week just gone, investors watched with delight as the ASX 200 hit a series of fresh new all-time highs. It was the first time that the ASX 200 had clocked a new high watermark since August 2021.
Friday's trading saw the ASX 200 close at 7,699.4 points – its highest-ever close. That was after the index hit its most recent all-time high of 7,703.6 points during intra-day trading.
Yet today, we're seeing investors lose that optimism that resulted in those new highs for ASX shares. At the time of writing, the ASX 200 has dropped dramatically. It's currently down a hefty 1.36% and back to 7,594.8 points.
So why have investors so decisively reversed the gains that we saw only a few days ago this Monday? Is it just a case of a market consolidation, or is there something else going on?
Why are ASX 200 shares pulling back from record highs today?
Well, it's hard to know exactly why the market is doing something on any given day. However, we can speculate.
It's very possible that, after an extraordinary runup last week, investors are just taking a breather, and perhaps some profits, today. It's worth keeping in mind that last week alone saw the ASX 200 climb by almost 2%.
That's an extraordinary gain for the index over just five trading days. Gains of this enthusiasm are often followed by periods of consolidation. That could well be what is going on this Monday.
However, we can't rule out other factors.
Over the weekend, the world wasn't exactly greeted with good news when it came to the global geopolitical scene. The United States, assisted by allies, spent the weekend ramping up retaliatory actions in the Middle East as a result of the attack in Jordan which killed three of its soldiers last week.
According to CNN, US National Security Adviser Jake Sullivan said that the American strikes in Iraq, Syria and Yemen were "the beginning of our response" and promised that "there will be further action".
Iran-backed Houthi groups in Yemen have already disrupted global trade in the Red Sea with a series of attacks on shipping vessels. If this conflict widens and the Red Sea continues to be a 'no-go zone' for international shipping, it could lead to global economic damage.
We've already seen global oil prices tick upwards as well as what's going in in the Middle East. According to Bloomberg, Brent crude oil futures are up 0.53% today to just under US$80 a barrel. WTI crude futures have also risen around 0.46% to US$72.60 a barrel.
So it's possible that the developments over the weekend, as well as potentially higher oil prices, are also weighing on investors' optimism on the ASX 200 today.
Whatever the cause for today's pessimism, it's certainly a jolt back to reality for ASX 200 investors this Monday. Let's see how the rest of the week plays out.
