Iran Tensions Send Ripples Through KiwiSaver and Fuel Markets
Global markets are bracing for volatility following recent attacks on Iran, with New Zealand investors potentially facing a turbulent week. Experts predict share market fluctuations and a possible rise in fuel prices, prompting concerns about the impact on KiwiSaver balances and household budgets.
KiwiSaver: What to Expect
Infometrics chief executive Brad Olsen anticipates volatility when markets open on Monday. “Usually you see stocks drop so I wouldn’t be surprised if people were looking at some of the investments they might have – their KiwiSaver balances… you might see a bit of red ink coming through there,” he stated. Investors are likely to shift towards less risky assets, such as gold, the Japanese yen, and the US dollar, as a “run for safety.”
Dean Anderson, founder of Kernel, emphasized the uncertainty. “We are in the very early stages of this conflict and as is often the case, speculation and incomplete information are driving much of the narrative.” He expects gold prices to jump as investors seek secure havens.
Though, some see opportunity in the downturn. Rupert Carlyon, founder of Koura, noted that a market downturn can be a “great buying opportunity” for KiwiSaver investors.
Fuel Price Concerns
The potential for increased fuel prices is a significant concern. Brad Olsen highlighted that oil prices spiked 7% higher last week, with a further 2-3% increase observed today. He cautioned that this time could be different due to the high-profile deaths of Iranian leaders and the potential for retaliation targeting oil-based facilities.
Insurance rates for travel through the Strait of Hormuz, a critical energy transit route, are already elevated, reflecting the increased risk of disruption. Approximately 20 percent of the world’s energy supply passes through this strait.
Some market traders are predicting oil prices could reach US$100 a barrel, though the outcome remains uncertain.
Inflationary Pressures
The Reserve Bank has already acknowledged geopolitical risk as a factor in tradeable inflation. Higher oil prices could exacerbate existing inflationary pressures, increasing costs for households and businesses alike. This could impact the price of goods, particularly those reliant on transportation.
Anderson noted that any disruption to supply through the Strait of Hormuz, particularly for major consumers like India and China, could further drive up oil prices and contribute to inflation.
What Should Investors Do?
Experts advise against making hasty decisions based on early speculation. Olsen suggests that day traders might see immediate impacts, but long-term investors should remain focused on their risk profile. “I won’t be looking at my KiwiSaver this week,” he advised.
Anderson recommends staying informed and avoiding knee-jerk reactions. Carlyon suggests viewing market dips as potential buying opportunities.
Looking Ahead: Uncertainty Remains
Mike Taylor, founder of Pie Funds, highlighted the historical precedents – the 2003 Iraq conflict, which saw a brief price spike followed by recovery, and the 1990 Gulf Crisis, which led to sustained price increases and disruption. He emphasized that it’s too early to determine which scenario will unfold.
The ongoing nature of the conflict, with the US continuing bombing missions and uncertainty surrounding Iranian command and control, adds to the overall uncertainty.
FAQ
Will my KiwiSaver be affected? Potentially, yes. Expect volatility, and you may see temporary declines in your balance.
Should I change my KiwiSaver fund? Not necessarily. Stick to a fund that aligns with your risk tolerance and long-term goals.
Will petrol prices go up? It’s likely, but the extent of the increase is uncertain. Oil prices have already risen, and further escalation could lead to higher prices at the pump.
Is this a excellent time to buy investments? Some experts believe market downturns present buying opportunities, but it’s crucial to assess your risk tolerance.
What is the Strait of Hormuz and why is it important? It’s a vital shipping lane for oil, and disruption there could significantly impact global energy supplies.
