Staff writersUpdated September 8, 2026 — 11:12am,first published September 8, 2026 — 5:12amThe Australian sharemarket slumped to a six-week low on Tuesday, with investors bracing for higher interest rates as the Middle East conflict continues to push up oil prices, fuelling inflation.The S&P/ASX 200 fell 90.10 points, or 1 per cent, to 8920, the lowest close since July 27, with eight of its 11 sectors in the red. The slump came after the ASX edged 0.1 per cent higher on Monday. The Australian dollar was trading higher at US72.12¢.The ASX had a muted start this morning. Oscar ColmanWith the war in the Middle East escalating again, oil prices kept pushing higher, adding to an already difficult inflationary backdrop.Brent oil is closing in on $US100 a barrel as traders watch for details of an Iranian deal with Oman to manage shipping through the Strait of Hormuz, which could tighten Tehran’s control over the crucial waterway, while strong Chinese buying tightens the market. The global benchmark is less than $US3 shy of triple figures after rallying last week on a flare-up in Middle East hostilities.Iran said the accord was imminent and would include a temporary safe route, raising questions about how the US would respond after striking Iranian tankers over the weekend. Tehran also warned that ships face the risk of attack near Oman.“Markets are increasingly pricing a prolonged Mideast conflict,” Goldman Sachs analysts wrote in a note to clients, raising their oil-price estimates on the assumption that shipping disruptions will persist into 2027. “Risks to our price forecast remain significantly tilted to the upside.”The elevated fuel costs are driving up inflation, which could prompt central banks such as the Federal Reserve and Australia’s Reserve Bank to push up interest rates further. Higher rates raise borrowing costs for businesses and consumers, weighing on company profits and share prices.RBA assistant governor Sarah Hunter reiterated on Tuesday that Australia’s central bank views elevated inflation as its top priority.“If there is a sense that inflation is going to be stronger than we think in the context of our forecast, the board may well have to raise interest rates to tackle that,” she told a conference in Sydney. Money markets are now wagering a 69 per cent chance of a hike in three weeks’ time and fully pricing one in for the November meeting.The strong oil price bolstered the energy sector. While the nation’s biggest oil stock, Woodside, wobbled and edged down 0.1 per cent, Santos and refiner Ampol both rose 0.7 per cent. Coal producers Yancoal, which stands to benefit as investors are looking to fossil fuel alternatives during spiking oil prices, gained 0.8 per cent.Defensive sectors such as utilities and healthcare also advanced, with power providers Origin and AGL rising 0.9 per cent and 0.6 per cent, respectively, while biotech CSL gained another 0.9 per cent.However, the mining and financial heavyweights, which combined make up more than half of the entire ASX, struggled. None of the big four banks were in the green, with Commonwealth Bank shares falling 1.8 per cent, National Australia Bank dropping 1.5 per cent, Westpac losing 1.3 per cent and ANZ Bank slumping 2.6 per cent.Iron ore and copper giants BHP and Rio Tinto were down 0.6 per cent and 0.8 per cent, respectively, even as copper surged to its highest-ever price on the London Metal Exchange after a weeks-long rally fuelled by anticipation that President Donald Trump will expand US tariffs to imports of refined metal. Pure-play iron ore producer Fortescue Mining lost 1.4 per cent. BlueScope Steel slumped 5.8 per cent as its stock traded without the right to its latest dividend for the first time.Gold miners provided a rare bit of sparkle. Northern Star Resources edged up 0.1 per cent and Newmont climbed 1 per cent as gold prices gained as much as 0.7 per cent to top $US4435 an ounce, wiping out a loss in the previous session.Sectors dependent on consumer spending and affordable borrowing costs were also hit by Tuesday’s sell-down. Bunnings and Officeworks owner Wesfarmers lost 2.7 per cent and electronics seller JB Hi-Fi dropped 2.3 per cent, while supermarket giants Woolworths and Coles were down 1.7 per cent and 0.8 per cent respectively.Australia’s consumer confidence slumped back into pessimism this month, spurred by household concerns about more rate hikes and the higher fuel costs. The Consumer Sentiment Index dropped 5.2 per cent to 84.4 points, Westpac said this morning, with 100 being the dividing line between pessimists and optimists.The survey showed cost of living pressures “have ratcheted up again” with a sub-index tracking assessments of “family finances vs a year ago” tumbling 9.2 per cent.“The fall takes sentiment back towards the deeply pessimistic levels seen earlier in the year,” said Matthew Hassan, Westpac’s head of Australian macro-forecasting. “Local pump prices have lifted back above $2/litre for the first time since April, reflecting higher global energy prices and the end of the temporary halving in fuel excise tax.”Tech companies, which rely on affordable debt to ramp up their R&D and investments in AI, took a hit as well. Software makers Xero and WiseTech shed 2.6 per cent and 2.8 per cent respectively, and AI data centre operator NextDC dropped 1.8 per cent.Wall Street was closed on for the Labor Day holiday overnight, while in Europe, the Stoxx Europe 600 Index finished little changed. Energy stocks outperformed, while the media and insurance sectors were among the biggest laggards. US stock futures fell in cautious trading. S&P 500 futures dropped 0.2 per cent while Nasdaq 100 contracts gained 0.1 per cent.Novartis shares fell 3.2 per cent, the most they have retreated since April on news that pelacarsen, a potential blockbuster cholesterol drug, failed in a final-stage study. Semiconductor supplier SOITEC rose 12 per cent, outperforming peers in a strong day of trading for AI-adjacent names including Infineon Technologies, which gained 6.9 per cent after an analyst upgrade.Meanwhile, a blockchain used by several cryptocurrency exchanges to move Bitcoin has been hacked for $US320 million ($445 million), the latest in a spate of breaches to shake confidence in digital-asset security. Roughly 4,000 of the 4,200 Bitcoin held in a wallet used by Liquid Network were taken, the platform operator said in a post on X.It said the perpetrators appear to be “white-hat hackers” who exploit security flaws and typically return the funds, sometimes in exchange for a fee.with BloombergThe Market Recap newsletter is a wrap of the day’s trading. Get it each weekday afternoon.From our partners