ASX energy good, Australia bad

The ASX has edged about 1% higher today, but it hardly feels like a raging bull market.

It looks more like the most cautious form of dip-buying you’ll ever see after last weeks budget shemozzle out of Canberra.

Investors are still digesting the hit to sentiment from the government’s tax tinkering and the broader sense that policy risk in Australia is rising, not falling.

You can see that in the way local equities sold off into the budget, with healthcare, consumer and financial stocks wearing the brunt of the damage.

The modest bounce today feels less like renewed confidence in the domestic outlook and more about the reprieve in the Strait of Hormuz.

Trump pumps the brakes

On that front, the real driver sits far from Canberra.

Donald Trump has again opted to hold off on a major fresh strike on Iran after pressure from regional allies, keeping the conflict in a strange limbo.

The ceasefire may be fragile and frequently violated at the margins, but markets are latching onto any sign that the White House prefers negotiations and targeted love taps over full-scale escalation that would shut the Strait of Hormuz for good.

At the same time, Vladimir Putin is leaning hard into his energy pivot east.

Moscow is pushing to finalise the massive Power of Siberia 2 gas pipeline to China, on top of existing routes that already send tens of billions of cubic metres a year into the country.

Russia wants to lock in China as its primary gas customer for decades, while Beijing secures more pipeline gas it doesn’t have to move through contested sea lanes.

Put those threads together and one lesson keeps coming back. Energy is still the spine of global markets.

China’s economy remains overwhelmingly powered by fossil fuels. Europe is scrambling to replace Russian supply.

And every flare-up in Iran reminds traders that a single chokepoint in the Gulf can reprice the entire energy complex in a matter of days.

Takeaways for ASX investments

For ASX investors, that backdrop keeps pointing toward energy producers and energy-linked commodities as the long term structural winners.

The sweet spot is exposure to projects that plug into these global energy demand sources without getting tangled up in Australia’s own regulatory web.

Because let’s be honest. Canberra can’t resist loading new approvals, royalties and ESG rules onto local projects, even as other jurisdictions court the same capital with open arms.

The more that Russia, the Middle East and North America reshape supply, the more valuable it becomes to own energy and commodity names on the ASX whose underlying assets sit in places where governments still want development.

There’s still hope, but it needs to be found away from our shores.

At least for the next two years.