Well, that was fast!
Last week, investors were assured by United States President Donald Trump that the Strait of Hormuz would fully reopen for oil shipments and other cargo vessels on Friday. But over the weekend, Iran claimed that the vital shipping route was once again closed for business.
The original reopening of the Strait of Hormuz – which was responsible for some 25% of global oil and gas shipments prior to the Middle East war – came following a tentative peace deal between the US and Iran.
But that deal looks to be fraying amid the ongoing conflict between Israel and Iran's Hezbollah allies in Lebanon.
In response to Israeli strikes in Lebanon, Iran's leaders said the US is in breach of its agreement to not only halt attacks on its own territory but also to stop the fighting in Lebanon.
Trump took a decidedly different approach. The US president wrote on social media:
Iran must immediately stop their highly paid PROXIES in Lebanon from causing trouble. If they don't, we'll hit Iran very hard again, just like we did last week, only harder!!!
Despite Iran's claims, oil tankers were still reported to be moving through the contested shipping route over the weekend.
Negotiations, spearheaded by US Vice President JD Vance, remain ongoing, with the latest reports indicating the strait may remain open.
Or not…
Image source: Getty Images
What does the Strait of Hormuz closure mean for ASX shares?
So far, ASX investors appear to be taking the news in stride.
At the time of writing, the S&P/ASX 200 Index (ASX: XJO) has climbed out of the red to be up 0.2%.
Technology stocks are having a tougher run of it, with the S&P/ASX 200 Information Technology Index (ASX: XIJ) down 1% at this same time.
That's likely because a breakdown of the peace deal and a renewed closure of the Strait of Hormuz will drive oil prices higher again. This, in turn, will stoke inflation and pressure central banks to raise interest rates.
ASX tech stocks are often more sensitive to interest rate moves, as they tend to be priced with future earnings in mind. And as rates go up, so too does the price of investing in those future earnings.
Gold shares also often take a hit amid concerns over rising inflation and rates. But most of the ASX gold stocks are bucking that historic trend today, with the S&P/ASX All Ordinaries Gold Index (ASX: XGD) up 2% on Monday. This follows a 1.3% increase in the gold price to US$4,211 per ounce.
And while the Brent crude oil price is up 0.7% to US$81.10 per barrel (according to data from Bloomberg), the S&P/ASX 200 Energy Index (ASX: XEJ) is down 0.9% today as traders hedge their bets on the outcome of the ongoing negotiations.
The ASX 200 Energy Index remains up 14.4% year to date.
What should I do if I'm buying ASX shares?
If you're a day trader, issues like the closure and potential reopening of the Strait of Hormuz present some great opportunities to make, or lose, a lot of money.
If you're buying ASX shares for the long term, the best thing to do is to try to avoid changing your investment plans based on the daily and weekly news cycles.
Long-term investors would do well to continue to focus on buying quality companies at a good price. Also, to look for strong management teams, solid growth prospects, and sizeable moats in place to keep would-be competitors at bay.
