Australian stocks post worst monthly performance in four years, while energy stocks rally against the trend

Gronghui March 31｜Australian stocks closed slightly higher on Tuesday as investors bought at lows, but concerns over the inflation risks from the escalating Middle East war, weak demand, and rising borrowing costs led the Australian market to post its largest monthly decline since June 2022. The benchmark S&P/ASX200 index fell a total of 7.8% in a volatile March. Energy stocks were the only major sub-index to post gains in March, driven by rising oil prices, rising 18.5%—the best performance since April 2020. Swap contracts show the probability of the Reserve Bank of Australia raising rates in May is 58%, and suggest there is still about 60 basis points of tightening room for the remainder of 2026. Merewether Capital portfolio manager Luke Winchester stated: “The market is still betting that the Middle East conflict can be resolved quickly. If things don't go as hoped, I agree with those experts who think the situation could get very bad. And in such a scenario, rate hikes will only bring more pain.”