Oil surge steers ASX lower after US talks with Iran collapse

The Australian share market is set to open lower in morning trading, following a mixed session on Wall Street. The price of oil is surging after US President Donald Trump said talks with Iran had collapsed, a development that pushed crude futures higher.

S&P 500 futures edged lower overnight as energy stocks rallied while technology shares slipped. The Dow Jones Industrial Average closed near flat, and the Nasdaq Composite fell 0.4%. The mixed result leaves the ASX 200 futures pointing to a decline of roughly 0.3% at the open.

Brent crude jumped more than 3% to trade above $73 a barrel after Trump told reporters the US was no longer in negotiations with Iran over its nuclear program. The breakdown in diplomacy removes a key source of potential supply relief from a market already tight on OPEC+ production cuts. West Texas Intermediate crude rose a similar margin, crossing $69 a barrel.

The oil move cuts two ways for the ASX. Energy stocks, including Woodside and Santos, should open higher on the crude rally. The broader market faces pressure from higher fuel costs, which feed into inflation expectations and complicate the Reserve Bank's rate path. Transport and retail stocks carry the most downside exposure.

Mining stocks are also in focus after iron ore futures in Singapore slipped 1.2% overnight, tracking weaker Chinese steel demand data. BHP and Rio Tinto are expected to open lower.

The Australian dollar bought 66.8 US cents in early Sydney trading, little changed from Friday's close. The currency has been range-bound near the 67-cent level as traders wait for the RBA's July meeting minutes due Tuesday and the quarterly CPI print due July 31.

Treasury yields were mixed. The US 10-year note yield edged up to 4.25%, while the Australian 10-year bond yield held at 4.38%. The yield spread between the two remains near its widest in a month, reflecting divergent rate expectations.

On the corporate calendar, no major earnings or economic data are due Monday. The RBA's July board meeting minutes are the next domestic catalyst, followed by the June jobs report on Thursday.

Oil's surge is the dominant near-term risk for the ASX open. If crude holds above $70 a barrel through the session, energy stocks will provide a floor. The broader index faces headwinds from inflation-sensitive sectors.