Macro Shocks and Micro Risks

by Josh Wilson, Portfolio Manager

The New Zealand share market has fallen -6% since the war broke out between the US, Israel and Iran. This is in stark contrast to the US share market which has risen +5% in the same period.

The divergent performance can be at least partly attributed to the anticipated impact of constrained fuel supply and higher prices on our respective economies: New Zealand is heavily dependent on the Middle East-Asian fuel supply chain, and we’re an export driven economy that suffers even more from the tyranny of distance when fuel (and freight) costs rise. Exports comprise nearly a quarter of our GDP. In contrast, the US is self-sufficient in oil and does a lot of business with itself (exports are about 10% of GDP).

Furthermore, for the struggling New Zealand economy, where it was finally looking like the ‘green shoots’ of recovery might grow into something more meaningful, the spike in fuel costs, inflation fears, and interest rate rises mean we may now be waiting until 2027 for this to eventuate. Consensus expectations for economic growth in 2026 have fallen from 2.4% to 1.8% since the start of the year and may fall further if the conflict and high fuel prices persist.