Sydney, June 14 — Tensions between Israel and Iran have rattled global markets, sending oil prices sharply higher and raising new fears about inflation and supply chain disruptions — including here in Australia.
The conflict intensified after Israel launched strikes on Iranian military and nuclear sites, prompting a swift retaliation from Tehran. While fighting hasn’t directly hit oil infrastructure, investors and governments alike are nervous — especially about what might happen next.
One major concern? The Strait of Hormuz, a narrow waterway off Iran’s southern coast through which nearly 20% of the world’s oil flows. If tensions escalate and shipping through this critical route is disrupted, we could be looking at the biggest energy shock in years.
Oil Prices Spike on Escalation Fears
Brent crude oil prices — the global benchmark — jumped more than 13% at one point, before settling around 5% higher by Friday’s close. That’s the biggest single-day rise in months.
While prices are still below the peaks seen during Russia’s 2022 invasion of Ukraine, the latest spike has stirred fresh anxiety.
“This is a serious situation,” said Matt Gertken, a geopolitical strategist with BCA Research. “If the Strait of Hormuz is blocked, even temporarily, it could trigger one of the worst oil supply shocks we’ve ever seen.”
Will Petrol Prices Rise in Australia?
Here at home, the ripple effects of higher oil prices could soon be felt at the bowser. Experts say that if oil stays high for long enough, petrol and diesel prices in Australia could creep upward in the weeks ahead.
“A $10 jump in crude oil usually adds around 7 cents per litre at the pump,” explained David Oxley from Capital Economics. “But it’s not just about fuel — higher energy costs can make everything more expensive, from groceries to flights.”
That’s because energy touches every part of the economy — from powering farm equipment and factories to running transport networks.
Markets Watching the Strait of Hormuz Closely
So far, oil tankers are still moving through the Strait of Hormuz, but many are doing so cautiously. Countries like the UK and Greece have told ships to avoid nearby waterways, just in case.
Iran has threatened to close the strait before — though it hasn’t acted on those threats yet. Still, the fear alone is enough to spook markets.
“If the strait gets closed or shipping is blocked, even for a short time, prices could explode,” said Taufiq Rahim, a Dubai-based geopolitical strategist. “We’re not there yet, but things are moving fast.”
Is the Global Economy at Risk?
Unfortunately, this flare-up comes at a time when the global economy is already walking a tightrope.
Inflation is still high in many countries, including Australia. Central banks — like the RBA — are trying to cool it down without triggering a recession. A sudden jump in oil prices could make that job much harder.
Mohammed El-Erian, an economist with Allianz, called the conflict “a bad shock at a bad time,” warning it could weigh on consumer confidence and slow growth around the world.
If oil prices rise above $100 per barrel again, it could push inflation up by 1% across major economies — making it harder for rates to fall anytime soon.
What’s Next?
For now, experts are taking a cautious “wait and see” approach. The good news? There’s still time to de-escalate. Israel hasn’t targeted Iran’s oil facilities, and Iran — for now — has avoided hitting Saudi oilfields or closing shipping lanes.
But that could change.
There’s even speculation that Iran might strike oil infrastructure in Iraq — a move that could slash global supply without provoking direct U.S. intervention.
“They might go after smaller targets with some deniability,” Gertken said. “That would still send shockwaves through the energy market.”
Meanwhile, the International Energy Agency says it’s ready to release emergency oil reserves if needed. But critics say that move could backfire by creating more panic than stability.
What It Means for Aussie Households
In Australia, the effects may take a little time to show — but they will come. Higher fuel prices, shipping costs, and manufacturing expenses can all push up the cost of living.
With household budgets already under pressure, another global shock is the last thing many Australians need.
Let’s hope cooler heads prevail. But for now, the world — and the oil market — is holding its breath.