Australian shares retreated further on Monday, weighed by falling oil and iron ore prices amid concerns that high energy costs will add to the risks of a global recession that would ultimately curb demand.

The S&P/ASX 200 eased 0.6 per cent, or 41.4 points, to 6433.4, in the fifth session of losses.

It closed at the lowest level in 18 months, bringing the market decline from last August’s peak to 16 per cent, edging closer to bear territory.

The All Ordinaries shed 0.8 per cent to 6609.5

Risk assets, from stocks to commodities and the Australian dollar, have been hammered on fears that big central banks will tighten aggressively to fight rising inflation and that those moves may tip the world into recession.

Australian shares had their worst week last week since the pandemic started on fears that sharply higher interest rates will erode earnings.

“There’s obviously a lot of concern about the economic backdrop with further rate hikes, but what the fundamentals are suggesting at the moment is that oil is a very tight market with supply side issues,

which we don’t think will lead to end soon,” said Daniel Hynes, a senior commodity strategist at ANZ.

He forecast Brent crude prices to hold about $US125 a barrel by year-end, from $113.04 currently, with the risk of higher prices should other surprise disruptions emerge.

US West Texas Intermediate crude fell to $US109.49 a barrel.

Oil from Russia, the world’s second-largest exporter, remains out of reach to most countries because of Western sanctions over Moscow’s war on Ukraine.

Medium Brush Stroke

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