Worst fortnight in 4 years: How the Iran war is affecting ASX shares

ASX shares have endured their worst fortnight of trading since June 2022, when rising inflation was stoking fears of a global recession.

Analysts at Commonwealth Bank of Australia (ASX: CBA) said the Iran war "continues to crush investor sentiment", commenting:

More than six per cent has been wiped from the combined value of Australia's 500 biggest listed companies since the Middle East erupted, wiping more than $200 billion from its combined $3 trillion market cap.

It was the local stock market's worst two-week performance since an inflation surge prompted global recession fears in June 2022.

Since the war began, the S&P/ASX 200 Index (ASX: XJO) has fallen 6.5%, and the S&P/ASX All Ords Index (ASX: XAO) has dropped 6.65%.

Today, the ASX 200 is up 0.21%, and the All Ords is 0.15% higher amid anticipation of an interest rate rise in Australia today.

Markets put the chances of an official cash rate rise from 3.85% to 4.1% at 58%, down from 71% last Friday.

The war is already having far-reaching economic effects in Australia.

Regional service stations are running out of diesel, which is essential to transport food and other goods to the cities.

NSW Energy Minister Penny Sharpe said the problem was fuel distribution, not supply, at a fuel security roundtable in Sydney last week.

The Federal Government has previously said Australia has about 36 days' worth of petrol and gas in storage.

However, many consumers and businesses have panic-bought fuel, which is creating shortages in some pockets of the nation.

The Federal Government released about six days' worth of petrol and diesel into the market last week to address the shortages.

The larger economic impact is that an ongoing fuel crunch will bump up inflation, which the Reserve Bank will mitigate with higher rates.

This is impacting both consumer and investment sentiment, resulting in a 'risk-off' mood and a consistent fall in the value of ASX shares.

How the war is impacting ASX shares

If we break down price movements on a sector-by-sector basis, we see a large disparity in the war's impact.

ASX energy shares are higher due to stronger oil and gas prices, which means oil & gas companies can make more for their materials.

The industries less impacted by the fuel crunch have experienced minor falls, while those reliant on fuel have taken a bigger hit.

Some ASX sectors, such as real estate, have fallen due to expectations of higher interest rates.

ASX shares are divided into 11 market sectors.

Here's what has happened since the war began on 1 March (Australian time).