From petrol to mortgages: How the war could hit your wallet
In Brief
- The ripple effects of the Iran conflict will pinch Australians’ wallets.
- Global oil prices have already jumped more than 8% since the outbreak of hostilities on Saturday.
Australians face the prospect of more cost-of-living pressure as the United States–Israel confrontation with Iran disrupts international trade.
Petrol prices are expected to rise after oil surged to its highest level in four years, as Iran threatens the Strait of Hormuz—the crucial shipping lane that carries about 20 million barrels of oil daily from the region.
If the conflict lasts, experts warn higher fuel costs could feed through to prices for goods and services nationwide.
Social Services Minister Tanya Plibersek acknowledged there will be domestic economic fallout from the escalating Middle East conflict.
“There was an economic impact from Russia’s invasion of Ukraine that affected the entire world, including Australia,” Plibersek told Channel Seven’s Sunrise program. “Our global oil and petrol prices are ultimately influenced by what happens in the Middle East.”
International disruption
Sea and air routes in the Middle East have been notably disrupted by the fighting.
Air travel in the region has been disrupted, with thousands of flights cancelled and airspace above Iran, Iraq, Israel, Saudi Arabia, Kuwait, and the United Arab Emirates largely closed.
The Strait of Hormuz—a narrow passage just 33 kilometers wide—remains a critical chokepoint, through which roughly 20–25% of all seaborne oil and liquefied natural gas travels, and Iranian state media say it is “practically closed.” At least three tankers were damaged near the Gulf coast, and one seafarer was killed in retaliatory strikes.
Danish shipping giant Maersk announced it would halt transit through both the Strait and the Suez Canal to ensure crew safety.
Maersk will reroute ships around the Cape of Good Hope, a detour that adds thousands of kilometres to voyage lengths.
Hapag-Lloyd and CMA CGM have said they will levy a “war risk surcharge” on cargo moving from large parts of the Middle East and Northeast Africa.
What does this mean for fuel prices?
Brent crude rose 8.8% on Monday, and US crude advanced about 8%, with Brent around US$79.34 per barrel and US crude around US$72.38 per barrel.
A widely cited rule of thumb suggests that every US$10 rise in a barrel’s price adds about 10 cents per litre at the pump in Australia.
If prices climb to around US$95 per barrel, petrol could rise by roughly 25–28 cents per litre, potentially edging close to $2 per litre in some areas, according to independent economist Saul Eslake from the University of Tasmania.
NRMA spokesperson Peter Khoury told reporters prices at the pump might rise by around 10%. He advised Australians not to panic, noting that overseas impacts typically take about seven to ten days to filter through domestically. He cautioned that sustained higher prices could eventually translate to higher domestic petrol prices if the trend continues.
Some petrol stations have already seen queues as people anticipate a price hike.
Khoury also urged oil companies not to use the situation as a pretext to inflate prices, stressing that stabilisation would be hoped for, but if the conflict persists, you may see prices move higher.
Timing matters
US President Donald Trump has suggested the conflict could last about four weeks, a timeline The Daily Mail reported him outlining.
Economist Eslake notes that if the fighting escalates or Iran undermines oil production in other Gulf states, fuel prices could jump to around US$2.20 per litre or higher, though that would be a significant extrapolation at this stage.
In a Truth Social video, Trump said combat operations would continue until “all of our objectives are achieved,” without specifying those objectives. He has urged Iranians to seize the moment and has previously spoken of destroying Iran’s nuclear enrichment sites.
OPEC+ agreed on a small production increase of about 206,000 barrels per day for April, with Saudi Arabia having already boosted output in anticipation of the conflict.
Eslake believes the intervention should prevent the same kind of price spike seen in 2022.
The Reserve Bank of Australia (RBA) does not normally account for volatile items like fuel and airfares in its underlying inflation measure. However, a prolonged two- to three-month conflict could push up domestic transportation costs, plastics, and consumer goods, potentially nudging inflation higher. If the RBA revises its inflation forecasts upward to reflect these volatile items, it may consider further interest-rate adjustments.
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