Devon Funds Morning Note - 01 September 2026

Tuesday 1st September 2026

Strikes Resume, Oil Reprices

Global

The Middle East conflict escalated militarily for the first time in a month. US forces struck two Iranian IRGC missile launchers on Larak Island, just off Iran's coast, after CENTCOM observed the IRGC preparing to fire rockets carrying sea mines into the Strait of Hormuz. Iran retaliated within hours, launching ballistic missiles at two US bases in Jordan, King Hussein and Al-Azraq air bases, claiming to have destroyed technical infrastructure and fighter jet deployment sites. Jordan's military said it intercepted eight missiles before they could cause damage. Trump, reacting Sunday night, called it "a very good thing" that Iran had also fired toward other Gulf states (Saudi Arabia, Qatar, UAE, Bahrain and Kuwait), arguing Iran had "lost all the support they had." He followed up on Truth Social declaring Iran "officially a Failed Nation," citing no navy, air force or functioning currency, 300% inflation and over 100,000 protester deaths, and called for leadership to be tried for war crimes.

With confidence in safe passage through Hormuz further eroded, Bessent said the US will sanction another bank this week targeting Iran-linked transactions ahead of G20 meetings, where he intends to press China and India directly. Treasury's first move under the new campaign was a proposal to cut UAE branches of Banque Misr, Egypt's second-largest bank, off from the US financial system over Iran dealings; the UAE central bank has since opened its own inspection of those branches.

Energy prices jumped on the escalation: WTI rose 3.4% to ~US$86.20/bbl and Brent gained 2.9% to ~US$90.60/bbl. Asia Pacific refining margins rose 7% to ~US$48/bbl and Singapore jet fuel jumped 4.7% to ~US$155/bbl, while the US Airlines Index fell 2.2% as the travel sector absorbed the higher fuel cost outlook.

On data, the August Dallas Fed index beat consensus by a wide margin, its best reading since January 2025, with new orders up 15.6 points to 22, though employment softened and input costs rose. The week ahead brings ISM Manufacturing Tuesday (consensus 55.2), ISM Services Thursday (consensus 54) and August payrolls Friday (consensus +55k, a hoped-for rebound from July's -23k surprise). Bond yields rose another 5bps at the long end, adding to the hawkish tone from Warsh's Jackson Hole speech.

Bessent also addressed public criticism from former mentor Stan Druckenmiller over his bond-market intervention, saying Druckenmiller "lost money the day he sent in the editorial" and that his own goal is to "speed things down" rather than let markets dictate policy, a stance that conveniently aligns his buyback program with the run-up to November 3 midterms.

New Zealand

The NZX 50 rose 0.7% to close out August with a monthly gain of 1.2%, its fourth consecutive positive month, rebounding from the prior five-day decline of 0.2%. Advancers outnumbered decliners 54 to 30, led by Gentrack, Sky Network Television and Vista Group, each up around 3%, while Vulcan Steel fell 3% and Briscoe Group and Goodman each eased 2%. Michael Hill International added to its recent momentum with a record FY26 revenue result of $655.7m, up 1.9%, and confirmed the resumption of dividend payments, while Kiwi Property reported portfolio sales up 2.1% and pedestrian traffic up 4.1%. Winton Land was suspended from trading on the NZX after its board fell to just one independent director, breaching NZX Listing Rules governance requirements.

On the macro front, ANZ's business outlook survey showed confidence easing 2 points to 54, with firms' own activity expectations down 1 point to 48, while inflation expectations ticked up from 3.14% to 3.26% as more businesses anticipate rising costs and plan to lift their own prices. Housing data added to a softer tone: Auckland Council issued 1,085 Code Compliance Certificates in June, taking the annual total to 13,540, down 12.3% on the prior year and the lowest 12-month total since October 2022. Separately, Centrix data showed company liquidations over the past year rose 14% to 3,092, with 302 insolvencies recorded in July alone versus 276 a year earlier, underscoring continued financial stress among smaller businesses even as headline equity markets grind higher.

Australia

The S&P/ASX 200 slipped 0.18% to close at 9,096, with declining stocks outnumbering gainers 673 to 467, as Gold, Metals & Mining and Materials led losses even as banks helped cushion the broader market. Greatland Resources fell 6%, Objective Corp dropped 5.3% and Northern Star Resources declined 5.2%, while PEXA Group rebounded 10% after last week's sharp selloff, and Domino's Pizza Enterprises and Reece both added around 3.5-4%. The weaker tone followed a soft lead from Wall Street overnight, with the S&P 500 down 0.3% and the Nasdaq off 0.5%.

Star Entertainment was the session's most dramatic mover, tumbling 4% to 12.5 cents after reporting a $307 million annual loss and flagging material uncertainty over its ability to continue as a going concern, citing potential AUSTRAC penalties, revenue growth challenges and ongoing casino licence issues, deepening doubts about the embattled operator's long-term survival.

In housing, Cotality data showed Sydney house prices fell 4.7% over the quarter to end-August and Melbourne dropped 3.9%, with the national measure down 0.9% for the month and 3.1% for the quarter, extending a run of weakness that adds to the case for the RBA to hold off on further tightening even as inflation data has recently pointed the other way.

In banking M&A, The Australian reported ANZ is weighing a purchase of Judo Bank, a move that would mark a significant consolidation play in the SME lending space and add scale to ANZ's business banking franchise should a deal progress.

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