Israel-Iran Conflict Escalates as ASX 200 Reacts to Global Tensions and Amazon's AI Push

Highlights

• Israel-Iran conflict intensifies, causing renewed market volatility across key sectors

• Amazon announces multi-year AI and cloud expansion across Australia

• Australian PM to address tariffs and AUKUS at upcoming G7 summit

Global equities, including those tracked on the ASX 200 and All Ordinaries, entered the new trading week amid heightened geopolitical tension, particularly across the Middle East. The ongoing exchange of missile strikes between Israel and Iran continues into its third day, prompting renewed investor focus on energy markets, security-related equities, and diplomatic developments.

Markets have responded with visible caution. The military developments have implications across oil supply chains and logistics sectors, particularly as key installations in Israel and Iran become targets of military operations.

Energy Markets Move on Escalation in Middle East

Oil-linked sectors are closely watched as Israel advances its military operation, codenamed “Operation Rising Lion,” reportedly targeting nuclear and military infrastructure within Iranian borders. Iran's response has included wide-scale missile attacks, with both nations reporting numerous casualties. These developments have pushed oil price trends higher, as fears mount about regional supply disruptions.

This conflict comes at a time when global energy markets are already navigating fluctuations from multiple pressure points, creating further uncertainty. As global focus shifts to emergency diplomatic interventions, volatility in key energy-producing equities and broader commodity-linked sectors remains elevated.

Amazon Commits to Expanding AI and Cloud Infrastructure in Australia

Amazon has confirmed a large-scale investment aimed at bolstering artificial intelligence and cloud capabilities across Australia. This initiative includes development across several new data infrastructure projects between 2025 and 2029. The announcement includes a partnership with European Energy to deliver new solar farms in Queensland and Victoria, further supporting Amazon’s goal to operate sustainably in the region.

The government has welcomed the move, framing it as a significant step in Australia’s digital transformation journey. With AI adoption becoming a national priority, tech and data-related initiatives are expected to remain a prominent theme for infrastructure strategy over the coming years.

Albanese Set to Raise Defence and Trade Issues at G7 Summit

Prime Minister Anthony Albanese is scheduled to meet with former US President Donald Trump at the upcoming G7 Summit in Canada. A key item on the agenda will be pushing back against calls to raise Australia’s defence budget, amid scrutiny under the AUKUS agreement. Albanese is also expected to address concerns over US tariffs, especially those affecting Australian steel, aluminium, and agricultural products.

As trade complexities rise between China and the US, Australia’s geopolitical positioning and economic relations with major powers remain central to its international strategy. Albanese is also set to advocate for a continued flow of critical minerals from Australia, reinforcing the country’s role in supporting clean energy transitions globally.

US-China Trade Deal Leaves Security Concerns Unsettled

While progress was made in US-China negotiations last week, key issues relating to national security remain unresolved. Specifically, discussions around rare-earth materials and AI-linked technologies ended without formal commitments. This omission has raised questions over the long-term viability of the agreement, especially as the US seeks to regulate sensitive exports with military applications.

Meanwhile, China has pledged to accelerate rare-earth export application processes for non-military buyers, but delays and scrutiny persist. Observers continue to monitor how these negotiations will evolve as the deadline for existing tariffs draws closer.

Broader Impacts Across Global Politics and Sentiment

In the US, political violence has dominated domestic headlines, with targeted attacks against elected officials drawing condemnation from national leadership. Simultaneously, a wave of protest movements under the “No Kings” banner swept through major cities, signalling widespread civil unrest.

Back in Australia, public sentiment remains subdued, with polling data from the Lowy Institute showing declining optimism on both national security and economic outlook. However, support for strategic defence initiatives, including nuclear-powered submarines under AUKUS, remains relatively strong.